23 CASES:

Case 1. Villaroel vs Estrada 71 Phil 140

Republic of the Philippines SUPREME COURT Manila

EN BANC DECISION

December 19, 1940

GR No. L-47362

JOHN F. VILLARROEL, appellant-appellant, vs..BERNARDINO ESTRADA, turned-appellee.

 D. Felipe Agoncillo in representation of the appellant-appelante.

 D. Crispin Oben in representation of the defendant-appellee.

Avanceña,

J.

On May 9, 1912, Alejandro F.  Callao, mother of defendant John F.  Villarroel, obtained
from the spouses Mariano Estrada and Severina a loan of  P1, 000 payable after seven years
(Exhibito A). Alejandra died, leaving as sole heir to the defendant.Spouses Mariano Estrada and
Severina also died, leaving as sole heir to the plaintiff Bernardino Estrada. On August 9, 1930,
the defendant signed a document (Exhibito B) by which the applicant must declare in the
amount of P1, 000, with an interest of 12 percent per year. This action relates to the recovery of
this amount.

The Court of First Instance of Laguna, which was filed in this action, condemn the
defendant to pay the claimed amount of P1, 000 with legal interest of 12 percent per year since
the August 9, 1930 until full pay. He appealed the sentence.

It will be noted that the parties in the present case are, respectively, the only heirs and
creditors of the original debtor. This action is brought under the defendant's liability as the only
son of the original debtor in favor of the plaintiff contracted, sole heir of primitive loa creditors.
It is recognized that the amount of P1, 000 to which contracts this obligation is the same debt
of the mother's parents sued the plaintiff.

Although the action to  recover the original debt has prescribed and when the lawsuit
was filed in this case, the question raised in this appeal is primarily whether, notwithstanding
such requirement, the action taken is appropriate. However, this action is based on the original
obligation contracted by the mother of the defendant, who has already prescribed, but in which
the defendant contracted the August 9, 1930 (Exhibito B) by assuming the fulfillment of that
obligation, as prescribed. Being the only defendant in the original herdero debtor eligible
successor into his inheritance, that  debt brought by his mother in law,  although it lost its
effectiveness by prescription, is now, however, for a moral obligation, that is consideration
enough to create and make effective  and enforceable obligation voluntarily contracted its
August 9, 1930 in Exhibito B.

The rule that a new promise to pay a debt prrescrita must be made by the same person
obligated or otherwise legally authorized by it, is not  applicable to the present case is
not  required in compliance with the mandatory obligation orignalmente but which would give
it voluntarily assumed this obligation.

It confirms the judgment appealed from, with costs  against the appellant. IT  IS SO
ORDERED.

 Imperial, Diaz, Laurel, and Horrilleno, MM., Concur.

 ——————————————————————————————————————————

Case 2. Ansay vs NDC 107 Phil 997

EN BANC

G.R. No. L-13667 April 29, 1960

PRIMITIVO ANSAY, ETC., ET AL., plaintiffs-appellants, 


vs.

THE BOARD OF DIRECTORS OF THE NATIONAL DEVELOPMENT
COMPANY, ET AL., defendants-appellees.

Celso A. Fernandez for appellants.


Juan C. Jimenez, for appellees.

PARAS, C. J.:

On July 25, 1956, appellants filed against appellees in the Court of First
Instance of Manila a complaint praying for a 20% Christmas bonus for the
years 1954 and 1955. The court a quo on appellees' motion to dismiss,
issued the following order:

Considering the motion to dismiss filed on 15 August, 1956, set for this
morning; considering that at the hearing thereof, only respondents
appeared thru counsel and there was no appearance for the plaintiffs
although the court waited for sometime for them; considering, however, that
petitioners have submitted an opposition which the court will consider
together with the arguments presented by respondents and the Exhibits
marked and presented, namely, Exhibits 1 to 5, at the hearing of the motion
to dismiss; considering that the action in brief is one to compel respondents
to declare a Christmas bonus for petitioners workers in the National
Development Company; considering that the Court does not see how
petitioners may have a cause of action to secure such bonus because:

(a) A bonus is an act of liberality and the court takes it that it is not within its
judicial powers to command respondents to be liberal;

(b) Petitioners admit that respondents are not under legal duty to give such
bonus but that they had only ask that such bonus be given to them
because it is a moral obligation of respondents to give that but as this Court
understands, it has no power to compel a party to comply with a moral
obligation (Art. 142, New Civil Code.).

IN VIEW WHEREOF, dismissed. No pronouncement as to costs.

A motion for reconsideration of the afore-quoted order was denied. Hence

this appeal.

Appellants contend that there exists a cause of action in their complaint

because their claim rests on moral grounds or what in brief is defined by
law as a natural obligation.

Since appellants admit that appellees are not under legal obligation to give
such claimed bonus; that the grant arises only from a moral obligation or
the natural obligation that they discussed in their brief, this Court feels it
urgent to reproduce at this point, the definition and meaning of natural
obligation.

Article 1423 of the New Civil Code classifies obligations into civil or natural.
"Civil obligations are a right of action to compel their performance. Natural
obligations, not being based on positive law but on equity and natural law,
do not grant a right of action to enforce their performance, but after
voluntary fulfillment by the obligor, they authorize the retention of what has
been delivered or rendered by reason thereof".

It is thus readily seen that an element of natural obligation before it can be

cognizable by the court is voluntary fulfillment by the obligor. Certainly
retention can be ordered but only after there has been voluntary
performance. But here there has been no voluntary performance. In fact,
the court cannot order the performance.

At this point, we would like to reiterate what we said in the case of

Philippine Education Co. vs. CIR and the Union of Philippine Education
Co., Employees (NUL) (92 Phil., 381; 48 Off. Gaz., 5278) —

xxx xxx xxx

From the legal point of view a bonus is not a demandable and enforceable
obligation. It is so when it is made a part of the wage or salary
compensation.
And while it is true that the subsequent case of H. E. Heacock vs. National
Labor Union, et al., 95 Phil., 553; 50 Off. Gaz., 4253, we stated that:

Even if a bonus is not demandable for not forming part of the wage, salary
or compensation of an employee, the same may nevertheless, be granted
on equitable consideration as when it was given in the past, though
withheld in succeeding two years from low salaried employees due to
salary increases.

still the facts in said Heacock case are not the same as in the instant one,
and hence the ruling applied in said case cannot be considered in the
present action.

Premises considered, the order appealed from is hereby affirmed, without

pronouncement as to costs.

Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion,

Endencia Barrera and Gutierrez David, JJ.,concur.

—————————————————————————————————

Case 3. DBP vs. Confessor (1988) 161 SCRA 307

FIRST DIVISION

G.R. No. L-48889 May 11, 1989

DEVELOPMENT BANK OF THE PHILIPPINES (DBP), petitioner, 


vs.

THE HONORABLE MIDPAINTAO L. ADIL, Judge of the Second Branch
of the Court of First Instance of Iloilo and SPOUSES PATRICIO
CONFESOR and JOVITA VILLAFUERTE, respondents.

GANCAYCO, J.:
The issue posed in this petition for review on certiorari is the validity of a
promissory note which was executed in consideration of a previous
promissory note the enforcement of which had been barred by prescription.

On February 10, 1940 spouses Patricio Confesor and Jovita Villafuerte

obtained an agricultural loan from the Agricultural and Industrial Bank (AIB),
now the Development of the Philippines (DBP), in the sum of P2,000.00,
Philippine Currency, as evidenced by a promissory note of said date
whereby they bound themselves jointly and severally to pay the account in
ten (10) equal yearly amortizations. As the obligation remained outstanding
and unpaid even after the lapse of the aforesaid ten-year period, Confesor,
who was by then a member of the Congress of the Philippines, executed a
second promissory note on April 11, 1961 expressly acknowledging said
loan and promising to pay the same on or before June 15, 1961. The new
promissory note reads as follows —

I hereby promise to pay the amount covered by my promissory note on or

before June 15, 1961. Upon my failure to do so, I hereby agree to the
foreclosure of my mortgage. It is understood that if I can secure a certificate
of indebtedness from the government of my back pay I will be allowed to
pay the amount out of it.

Said spouses not having paid the obligation on the specified date, the DBP
filed a complaint dated September 11, 1970 in the City Court of Iloilo City
against the spouses for the payment of the loan.

After trial on the merits a decision was rendered by the inferior court on
December 27, 1976, the dispositive part of which reads as follows:

WHEREFORE, premises considered, this Court renders judgment, ordering

the defendants Patricio Confesor and Jovita Villafuerte Confesor to pay the
plaintiff Development Bank of the Philippines, jointly and severally, (a) the
sum of P5,760.96 plus additional daily interest of P l.04 from September
17, 1970, the date Complaint was filed, until said amount is paid; (b) the
sum of P576.00 equivalent to ten (10%) of the total claim by way of
attorney's fees and incidental expenses plus interest at the legal rate as of
September 17,1970, until fully paid; and (c) the costs of the suit.

Defendants-spouses appealed therefrom to the Court of First Instance of

Iloilo wherein in due course a decision was rendered on April 28, 1978
reversing the appealed decision and dismissing the complaint and counter-
claim with costs against the plaintiff.

A motion for reconsideration of said decision filed by plaintiff was denied in

an order of August 10, 1978. Hence this petition wherein petitioner alleges
that the decision of respondent judge is contrary to law and runs counter to
decisions of this Court when respondent judge (a) refused to recognize the
law that the right to prescription may be renounced or waived; and (b) that
in signing the second promissory note respondent Patricio Confesor can
bind the conjugal partnership; or otherwise said respondent became liable
in his personal capacity. The petition is impressed with merit. The right to
prescription may be waived or renounced. Article 1112 of Civil Code
provides:

Art. 1112. Persons with capacity to alienate property may renounce

prescription already obtained, but not the right to prescribe in the future.

Prescription is deemed to have been tacitly renounced when the

renunciation results from acts which imply the abandonment of the right
acquired.

There is no doubt that prescription has set in as to the first promissory note
of February 10, 1940. However, when respondent Confesor executed the
second promissory note on April 11, 1961 whereby he promised to pay the
amount covered by the previous promissory note on or before June 15,
1961, and upon failure to do so, agreed to the foreclosure of the mortgage,
said respondent thereby effectively and expressly renounced and waived
his right to the prescription of the action covering the first promissory note.

This Court had ruled in a similar case that –

... when a debt is already barred by prescription, it cannot be enforced by

the creditor. But a new contract recognizing and assuming the prescribed
debt would be valid and enforceable ... . 1

Thus, it has been held —

Where, therefore, a party acknowledges the correctness of a debt and

promises to pay it after the same has prescribed and with full knowledge of
the prescription he thereby waives the benefit of prescription. 2
This is not a mere case of acknowledgment of a debt that has prescribed
but a new promise to pay the debt. The consideration of the new
promissory note is the pre-existing obligation under the first promissory
note. The statutory limitation bars the remedy but does not discharge the
debt.

A new express promise to pay a debt barred ... will take the case from the
operation of the statute of limitations as this proceeds upon the ground that
as a statutory limitation merely bars the remedy and does not discharge the
debt, there is something more than a mere moral obligation to support a
promise, to wit a – pre-existing debt which is a sufficient consideration for
the new the new promise; upon this sufficient consideration constitutes, in
fact, a new cause of action. 3

... It is this new promise, either made in express terms or deduced from an
acknowledgement as a legal implication, which is to be regarded as
reanimating the old promise, or as imparting vitality to the remedy (which
by lapse of time had become extinct) and thus enabling the creditor to
recover upon his original contract. 4

However, the court a quo held that in signing the promissory note alone,
respondent Confesor cannot thereby bind his wife, respondent Jovita
Villafuerte, citing Article 166 of the New Civil Code which provides:

Art. 166. Unless the wife has been declared a non compos mentis or a
spend thrift, or is under civil interdiction or is confined in a leprosarium, the
husband cannot alienate or encumber any real property of the conjugal
partnership without, the wife's consent. If she ay compel her to refuses
unreasonably to give her consent, the court m grant the same.

We disagree. Under Article 165 of the Civil Code, the husband is the
administrator of the conjugal partnership. As such administrator, all debts
and obligations contracted by the husband for the benefit of the conjugal
partnership, are chargeable to the conjugal partnership. 5 No doubt, in this
case, respondent Confesor signed the second promissory note for the
benefit of the conjugal partnership. Hence the conjugal partnership is liable
for this obligation.

WHEREFORE, the decision subject of the petition is reversed and set

aside and another decision is hereby rendered reinstating the decision of
the City Court of Iloilo City of December 27, 1976, without pronouncement
as to costs in this instance. This decision is immediately executory and no
motion for extension of time to file motion for reconsideration shall be
granted.

SO ORDERED.

Narvasa and Cruz, JJ., concur.

Griño-Aquino, J., took no part.

—————————————————————————————————

Case 4. Cruz vs Tuazon & Co. 76 SCRA 543

SECOND DIVISION

G.R. No. L-23749 April 29, 1977

FAUSTINO CRUZ, plaintiff-appellant, 


vs.

J. M. TUASON & COMPANY, INC., and GREGORIO ARANETA,
INC., defendants-appellees.

BARREDO, J.:

Appeal from the order dated August 13, 1964 of the Court of First Instance
of Quezon City in Civil Case No. Q-7751, Faustino Cruz vs. J.M. Tuason &
Co., Inc., and Gregorio Araneta, Inc., dismissing the complaint of appellant
Cruz for the recovery of improvements he has made on appellees' land and
to compel appellees to convey to him 3,000 square meters of land on three
grounds: (1) failure of the complaint to state a cause of action; (2) the
cause of action of plaintiff is unenforceable under the Statute of Frauds;
and (3) the action of the plaintiff has already prescribed.

Actually, a perusal of plaintiff-appellant's complaint below shows that he

alleged two separate causes of action, namely: (1) that upon request of the
Deudors (the family of Telesforo Deudor who laid claim on the land in
question on the strength of an "informacion posesoria" ) plaintiff made
permanent improvements valued at P30,400.00 on said land having an
area of more or less 20 quinones and for which he also incurred expenses
in the amount of P7,781.74, and since defendants-appellees are being
benefited by said improvements, he is entitled to reimbursement from them
of said amounts and (2) that in 1952, defendants availed of plaintiff's
services as an intermediary with the Deudors to work for the amicable
settlement of Civil Case No. Q-135, then pending also in the Court of First
Instance of Quezon City, and involving 50 quinones of land, of Which the
20 quinones aforementioned form part, and notwithstanding his having
performed his services, as in fact, a compromise agreement entered into
on March 16, 1963 between the Deudors and the defendants was
approved by the court, the latter have refused to convey to him the 3,000
square meters of land occupied by him, (a part of the 20 quinones above)
which said defendants had promised to do "within ten years from and after
date of signing of the compromise agreement", as consideration for his
services.

Within the Period allowed by the rules, the defendants filed separate
motions to dismiss alleging three Identical grounds: (1) As regards that
improvements made by plaintiff, that the complaint states no cause of
action, the agreement regarding the same having been made by plaintiff
with the Deudors and not with the defendants, hence the theory of plaintiff
based on Article 2142 of the Code on unjust enrichment is untenable; and
(2) anent the alleged agreement about plaintiffs services as intermediary in
consideration of which, defendants promised to convey to him 3,000
square meters of land, that the same is unenforceable under the Statute of
Frauds, there being nothing in writing about it, and, in any event, (3) that
the action of plaintiff to compel such conveyance has already prescribed.

Plaintiff opposed the motion, insisting that Article 2142 of the applicable to
his case; that the Statute of Frauds cannot be invoked by defendants, not
only because Article 1403 of the Civil Code refers only to "sale of real
property or of an interest therein" and not to promises to convey real
property like the one supposedly promised by defendants to him, but also
because, he, the plaintiff has already performed his part of the agreement,
hence the agreement has already been partly executed and not merely
executory within the contemplation of the Statute; and that his action has
not prescribed for the reason that defendants had ten years to comply and
only after the said ten years did his cause of action accrue, that is, ten
years after March 16, 1963, the date of the approval of the compromise
agreement, and his complaint was filed on January 24, 1964.
Ruling on the motion to dismiss, the trial court issued the herein impugned
order of August 13, 1964:

In the motion, dated January 31, 1964, defendant Gregorio Araneta, Inc.
prayed that the complaint against it be dismissed on the ground that (1) the
claim on which the action is founded is unenforceable under the provision
of the Statute of Frauds; and (2) the plaintiff's action, if any has already
prescribed. In the other motion of February 11, 1964, defendant J. M.
Tuason & Co., Inc. sought the dismissal of the plaintiffs complaint on the
ground that it states no cause of action and on the Identical grounds stated
in the motion to dismiss of defendant Gregorio Araneta, Inc. The said
motions are duly opposed by the plaintiff.

From the allegations of the complaint, it appears that, by virtue of an

agreement arrived at in 1948 by the plaintiff and the Deudors, the former
assisted the latter in clearing, improving, subdividing and selling the large
tract of land consisting of 50 quinones covered by the informacion
posesoria in the name of the late Telesforo Deudor and incurred expenses,
which are valued approximately at P38,400.00 and P7,781.74, respectively;
and, for the reasons that said improvements are being used and enjoyed
by the defendants, the plaintiff is seeking the reimbursement for the
services and expenses stated above from the defendants.

Defendant J. M. Tuason & Co., Inc. claimed that, insofar as the plaintiffs
claim for the reimbursement of the amounts of P38,400.00 and P7,781.74
is concerned, it is not a privy to the plaintiff's agreement to assist the
Deudors n improving the 50 quinones. On the other hand, the plaintiff
countered that, by holding and utilizing the improvements introduced by
him, the defendants are unjustly enriching and benefiting at the expense of
the plaintiff; and that said improvements constitute a lien or charge of the
property itself

On the issue that the complaint insofar as it claims the reimbursement for
the services rendered and expenses incurred by the plaintiff, states no
cause of action, the Court is of the opinion that the same is well-founded. It
is found that the defendants are not parties to the supposed express
contract entered into by and between the plaintiff and the Deudors for the
clearing and improvement of the 50 quinones. Furthermore in order that the
alleged improvement may be considered a lien or charge on the property,
the same should have been made in good faith and under the mistake as to
the title. The Court can take judicial notice of the fact that the tract of land
supposedly improved by the plaintiff had been registered way back in 1914
in the name of the predecessors-in-interest of defendant J. M. Tuason &
Co., Inc. This fact is confirmed in the decision rendered by the Supreme
Court on July 31, 1956 in Case G. R. No. L-5079 entitled J.M. Tuason &
Co. Inc. vs. Geronimo Santiago, et al., Such being the case, the plaintiff
cannot claim good faith and mistake as to the title of the land.

On the issue of statute of fraud, the Court believes that same is applicable
to the instant case. The allegation in par. 12 of the complaint states that the
defendants promised and agreed to cede, transfer and convey unto the
plaintiff the 3,000 square meters of land in consideration of certain services
to be rendered then. it is clear that the alleged agreement involves an
interest in real property. Under the provisions of See. 2(e) of Article 1403 of
the Civil Code, such agreement is not enforceable as it is not in writing and
subscribed by the party charged.

On the issue of statute of limitations, the Court holds that the plaintiff's
action has prescribed. It is alleged in par. 11 of the complaint that,
sometime in 1952, the defendants approached the plaintiff to prevail upon
the Deudors to enter to a compromise agreement in Civil Case No. Q-135
and allied cases. Furthermore, par. 13 and 14 of the complaint alleged that
the plaintiff acted as emissary of both parties in conveying their respective
proposals and couter-proposals until the final settlement was effected on
March 16, 1953 and approved by Court on April 11, 1953. In the present
action, which was instituted on January 24, 1964, the plaintiff is seeking to
enforce the supposed agreement entered into between him and the
defendants in 1952, which was already prescribed.

WHEREFORE, the plaintiffs complaint is hereby ordered DISMISSED

without pronouncement as to costs.

SO ORDERED. (Pp. 65-69, Rec. on Appeal,)

On August 22, 1964, plaintiff's counsel filed a motion for reconsideration

dated August 20, 1964 as follows:

Plaintiff through undersigned counsel and to this Honorable Court,

respectfully moves to reconsider its Order bearing date of 13 August 1964,
on the following grounds:
1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION
AGAINST DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM PAYMENT
OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES, IS
CONCERNED;

II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS.,
THE SAME HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS IS
NOT APPLICABLE THERETO;

ARGUMENT

Plaintiff's complaint contains two (2) causes of action — the first being an
action for sum of money in the amount of P7,781.74 representing actual
expenses and P38,400.00 as reasonable compensation for services in
improving the 50 quinones now in the possession of defendants. The
second cause of action deals with the 3,000 sq. ms. which defendants have
agreed to transfer into Plaintiff for services rendered in effecting the
compromise between the Deudors and defendants;

Under its order of August 3, 1964, this Honorable Court dismissed the claim
for sum of money on the ground that the complaint does not state a cause
of action against defendants. We respectfully submit:

1. THAT THE COMPLAINT STATES A SUFFICIENT CAUSE OF ACTION

AGAINST DEFENDANTS IN SO FAR AS PLAINTIFF'S CLAIM FOR
PAYMENT OF SERVICES AND REIMBURSEMENT OF HIS EXPENSES
IS CONCERNED.

Said this Honorable Court (at p. 2, Order):

ORDER

xxx xxx xxx

On the issue that the complaint, in so far as it claims the reimbursement for
the services rendered and expenses incurred by the plaintiff, states no
cause of action, the Court is of the opinion that the same is well-founded. It
is found that the defendants are not parties to the supposed express
contract entered into by and between the plaintiff and the Deudors for the
clearing and improvement of the 50 quinones. Furthermore, in order that
the alleged improvement may he considered a lien or charge on the
property, the same should have been made in good faith and under the
mistake as to title. The Court can take judicial notice of the fact that the
tract of land supposedly improved by the plaintiff had been registered way
back in 1914 in the name of the predecessors-in-interest of defendant J. M.
Tuason & Co., Inc. This fact is confirmed in the decision rendered by the
Supreme Court on July 31, 1956 in case G. R. No. L-5079 entitled 'J M.
Tuason & Co., Inc. vs, Geronimo Santiago, et al.' Such being the case, the
plaintiff cannot claim good faith and mistake as to the title of the land.

The position of this Honorable Court (supra) is that the complaint does not
state a cause of action in so far as the claim for services and expenses is
concerned because the contract for the improvement of the properties was
solely between the Deudors and plaintiff, and defendants are not privies to
it. Now, plaintiff's theory is that defendants are nonetheless liable since they
are utilizing and enjoying the benefit's of said improvements. Thus under
paragraph 16 of "he complaint, it is alleged:

(16) That the services and personal expenses of plaintiff mentioned in

paragraph 7 hereof were rendered and in fact paid by him to improve, as
they in fact resulted in considerable improvement of the 50 quinones, and
defendants being now in possession of and utilizing said
improvements should reimburse and pay plaintiff for such services and
expenses.

Plaintiff's cause of action is premised inter alia, on the theory of unjust

enrichment under Article 2142 of the civil Code:

ART. 2142. Certain lawful voluntary and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shill be unjustly
enriched or benefited at the expense of another.

In like vein, Article 19 of the same Code enjoins that:

ART. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give every-one his due and
observe honesty and good faith.

We respectfully draw the attention of this Honorable Court to the fact that
ARTICLE 2142 (SUPRA) DEALS WITH QUASI-CONTRACTS or situations
WHERE THERE IS NO CONTRACT BETWEEN THE PARTIES TO THE
ACTION. Further, as we can readily see from the title thereof (Title XVII),
that the Same bears the designation 'EXTRA CONTRACTUAL
OBLIGATIONS' or obligations which do not arise from contracts. While it is
true that there was no agreement between plaintiff and defendants herein
for the improvement of the 50 quinones since the latter are presently
enjoying and utilizing the benefits brought about through plaintiff's labor and
expenses, defendants should pay and reimburse him therefor under the
principle that 'no one may enrich himself at the expense of another.' In this
posture, the complaint states a cause of action against the defendants.

II. THAT REGARDING PLAINTIFF'S CLAIM OVER THE 3,000 SQ. MS.
THE SAME HAS NOT PRESCRIBED AND THE STATUTE OF FRAUDS IS
NOT APPLICABLE THERETO.

The Statute of Frauds is CLEARLY inapplicable to this case:

At page 2 of this Honorable Court's order dated 13 August 1964, the Court
ruled as follows:

ORDER

xxx xxx xxx

On the issue of statute of fraud, the Court believes that same is applicable
to the instant Case, The allegation in par. 12 of the complaint states that
the defendants promised and agree to cede, transfer and convey unto the
plaintiff, 3,000 square meters of land in consideration of certain services to
be rendered then. It is clear that the alleged agreement involves an interest
in real property. Under the provisions of Sec. 2(e) of Article 1403 of the Civil
Code, such agreement is not enforceable as it is not in writing and
subscribed by the party charged.

To bring this issue in sharper focus, shall reproduce not only paragraph 12
of the complaint but also the other pertinent paragraphs therein contained.
Paragraph 12 states thus:

C O M P LAI N T

xxx xxx xxx

12). That plaintiff conferred with the aforesaid representatives of

defendants several times and on these occasions, the latter promised and
agreed to cede, transfer and convey unto plaintiff the 3,000 sq. ms. (now
known as Lots 16-B, 17 and 18) which plaintiff was then occupying and
continues to occupy as of this writing, for and in consideration of the
following conditions:

(a) That plaintiff succeed in convincing the DEUDORS to enter into a

compromise agreement and that such agreement be actually entered into
by and between the DEUDORS and defendant companies;

(b) That as of date of signing the compromise agreement, plaintiff shall be

the owner of the 3,000 sq. ms. but the documents evidencing his title over
this property shall be executed and delivered by defendants to plaintiff
within ten (10) years from and after date of signing of the compromise
agreement;

(c) That plaintiff shall, without any monetary expense of his part, assist in
clearing the 20 quinones of its occupants;

13). That in order to effect a compromise between the parties. plaintiff not
only as well acted as emissary of both parties in conveying their respective
proposals and counter- proposals until succeeded in convinzing the
DEUDORS to settle with defendants amicably. Thus, on March 16, 1953, a
Compromise Agreement was entered into by and between the DEUDORS
and the defendant companies; and on April 11, 1953, this agreement was
approved by this Honorable Court;

14). That in order to comply with his other obligations under his agreement
with defendant companies, plaintiff had to confer with the occupants of the
property, exposing himself to physical harm, convincing said occupants to
leave the premises and to refrain from resorting to physical violence in
resisting defendants' demands to vacate;

That plaintiff further assisted defendants' employees in the actual

demolition and transferof all the houses within the perimeter of the 20
quinones until the end of 1955, when said area was totally cleared and the
houses transferred to another area designated by the defendants as 'Capt.
Cruz Block' in Masambong, Quezon City. (Pars. 12, 13 and 14, Complaint;
Emphasis supplied)

From the foregoing, it is clear then the agreement between the parties
mentioned in paragraph 12 (supra) of the complaint has already been fully
EXECUTED ON ONE PART, namely by the plaintiff. Regarding the
applicability of the statute of frauds (Art. 1403, Civil Code), it has been
uniformly held that the statute of frauds IS APPLICABLE ONLY TO
EXECUTORY CONTRACTS BUT NOT WHERE THE CONTRACT HAS
BEEN PARTLY EXECUTED:

SAME ACTION TO ENFORCE. — The statute of frauds has been uniformly

interpreted to be applicable to executory and not to completed or contracts.
Performance of the contracts takes it out of the operation of the statute. ...

The statute of the frauds is not applicable to contracts which are either
totally or partially performed, on the theory that there is a wide field for the
commission of frauds in executory contracts which can only be prevented
by requiring them to be in writing, a facts which is reduced to a minimum in
executed contracts because the intention of the parties becomes apparent
buy their execution and execution, in mots cases, concluded the right the
parties. ... The partial performance may be proved by either documentary
or oral evidence. (At pp. 564-565, Tolentino's Civil Code of the Philippines,
Vol. IV, 1962 Ed.; Emphasis supplied).

Authorities in support of the foregoing rule are legion. Thus Mr. Justice
Moran in his 'Comments on the Rules of Court', Vol. III, 1974 Ed., at p. 167,
states:

2 THE STATUTE OF FRAUDS IS APPLICABLE ONLY TO EXECUTORY

CONTRACTS: CONTRACTS WHICH ARE EITHER TOTALLY OR
PARTIALLY PERFORMED ARE WITHOUT THE STATUE. The statute of
frauds is applicable only to executory contracts. It is neither applicable to
executed contracts nor to contracts partially performed. The reason is
simple. In executory contracts there is a wide field for fraud because unless
they be in writing there is no palpable evidence of the intention of the
contracting parties. The statute has been enacted to prevent fraud. On the
other hand the commission of fraud in executed contracts is reduced to
minimum in executed contracts because (1) the intention of the parties is
made apparent by the execution and (2) execution concludes, in most
cases, the rights of the parties. (Emphasis supplied)

Under paragraphs 13 and 14 of the complaint (supra) one can readily see
that the plaintiff has fulfilled ALL his obligation under the agreement
between him defendants concerning the 3,000 sq. ms. over which the latter
had agreed to execute the proper documents of transfer. This fact is further
projected in paragraph 15 of the complaint where plaintiff states;

15). That in or about the middle of 1963, after all the conditions stated in
paragraph 12 hereof had been fulfilled and fully complied with, plaintiff
demanded of said defendants that they execute the Deed of Conveyance in
his favor and deliver the title certificate in his name, over the 3,000 sq. ms.
but defendants failed and refused and continue to fail and refuse to heed
his demands. (par. 15, complaint; Emphasis supplied).

In view of the foregoing, we respectfully submit that this Honorable court

erred in holding that the statute of frauds is applicable to plaintiff's claim
over the 3,000 sq. ms. There having been full performance of the contract
on plaintiff's part, the same takes this case out of the context of said
statute.

Plaintiff's Cause of Action had NOT Prescribed:

With all due respect to this Honorable court, we also submit that the Court
committed error in holding that this action has prescribed:

ORDER

xxx xxx xxx

On the issue of the statute of limitations, the Court holds that the plaintiff's
action has prescribed. It is alleged in par. III of the complaint that, sometime
in 1952, the defendants approached the plaintiff to prevail upon the
Deudors to enter into a compromise agreement in Civil Case No. Q-135
and allied cases. Furthermore, pars. 13 and 14 of the complaint alleged
that plaintiff acted as emissary of both parties in conveying their respective
proposals and counter-proposals until the final settlement was affected on
March 16, 1953 and approved by the Court on April 11, 1953. In the
present actin, which was instituted on January 24, 1964, the plaintiff is
seeking to enforce the supposed agreement entered into between him and
the defendants in 1952, which has already proscribed. (at p. 3, Order).

The present action has not prescribed, especially when we consider

carefully the terms of the agreement between plaintiff and the defendants.
First, we must draw the attention of this Honorable Court to the fact that
this is an action to compel defendants to execute a Deed of Conveyance
over the 3,000 sq. ms. subject of their agreement. In paragraph 12 of the
complaint, the terms and conditions of the contract between the parties are
spelled out. Paragraph 12 (b) of the complaint states:

(b) That as of date of signing the compromise agreement, plaintiff shall be

the owner of the 3,000 sq. ms. but the documents evidencing his title over
this property shall be executed and delivered by defendants to
plaintiff within ten (10) years from and after date of signing of the
compromise agreement. (Emphasis supplied).

The compromise agreement between defendants and the Deudors which

was conclude through the efforts of plaintiff, was signed on 16 March 1953.
Therefore, the defendants had ten (10) years signed on 16 March 1953.
Therefore, the defendants had ten (10) years from said date within which to
execute the deed of conveyance in favor of plaintiff over the 3,000 sq.
ms. As long as the 10 years period has not expired, plaintiff had no right to
compel defendants to execute the document and the latter were under no
obligation to do so. Now, this 10-year period elapsed on March 16, 1963.
THEN and ONLY THEN does plaintiff's cause of action plaintiff on March
17, 1963. Thus, under paragraph 15, of the complaint (supra) plaintiff made
demands upon defendants for the execution of the deed 'in or about the
middle of 1963.

Since the contract now sought to be enforced was not reduced to writing,
plaintiff's cause of action expires on March 16, 1969 or six years from
March 16, 1963 WHEN THE CAUSE OF ACTION ACCRUED (Art. 1145,
Civil Code).

In this posture, we gain respectfully submit that this Honorable Court erred
in holding that plaintiff's action has prescribed.

PRAYE R

WHEREFORE, it is respectfully prayed that " Honorable Court reconsider

its Order dated August 13, 1964; and issue another order denying the
motions to dismiss of defendants G. Araneta, Inc. and J. M. Tuason Co.
Inc. for lack of merit. (Pp. 70-85, Record on Appeal.)

Defendants filed an opposition on the main ground that "the arguments

adduced by the plaintiff are merely reiterations of his arguments contained
in his Rejoinder to Reply and Opposition, which have not only been refuted
in herein defendant's Motion to Dismiss and Reply but already passed
upon by this Honorable Court."

On September 7, 1964, the trial court denied the motion for

reconsiderations thus:

After considering the plaintiff's Motion for Reconsideration of August 20,

1964 and it appearing that the grounds relied upon in said motion are mere
repetition of those already resolved and discussed by this Court in the
order of August 13, 1964, the instant motion is hereby denied and the
findings and conclusions arrived at by the Court in its order of August 13,
1964 are hereby reiterated and affirmed.

SO ORDERED. (Page 90, Rec. on Appeal.)

Under date of September 24, 1964, plaintiff filed his record on appeal.

In his brief, appellant poses and discusses the following assignments of

error:

I. THAT THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT

ON THE GROUND THAT APPELLANT'S CLAIM OVER THE 3,000 SQ.
MS. IS ALLEGEDLY UNENFORCEABLE UNDER THE STATUTE OF
FRAUDS;

II. THAT THE COURT A QUO FURTHER COMMITTED ERROR IN

DISMISSING APPELLANT'S COMPLAINT ON THE GROUND THAT HIS
CLAIM OVER THE 3,000 SQ. MS. IS ALLEGEDLY BARRED BY THE
STATUTE OF LIMITATIONS; and

III. THAT THE LOWER COURT ERRED IN DISMISSING THE

COMPLAINT FOR FAILURE TO STATE A CAUSE OF ACTION IN SO FAR
AS APPELLANT'S CLAIM FOR REIMBURSEMENT OF EXPENSES AND
FOR SERVICES RENDERED IN THE IMPROVEMENT OF THE FIFTY
(50) QUINONES IS CONCERNED.

We agree with appellant that the Statute of Frauds was erroneously applied
by the trial court. It is elementary that the Statute refers to specific kinds of
transactions and that it cannot apply to any that is not enumerated therein.
And the only agreements or contracts covered thereby are the following:
(1) Those entered into in the name of another person by one who has been
given no authority or legal representation, or who has acted beyond his
powers;

(2) Those do not comply with the Statute of Frauds as set forth in this
number, In the following cases an agreement hereafter made shall be
unenforceable by action, unless the same, or some note or memorandum
thereof, be in writing, and subscribed by the party charged, or by his agent;
evidence, therefore, of the agreement cannot be received without the
writing, or a secondary evidence of its contents:

(a) An agreement that by its terms is not to be performed within a year from
the making thereof;

(b) A special promise to answer for the debt, default, or miscarriage of

another;

(c) An agreement made in consideration of marriage, other than a mutual

promise to marry;

(d) An agreement for the sale of goods, chattels or things in action, at a

price not less than five hundred pesos, unless the buyer accept and receive
part of such goods and chattels, or the evidences, or some of them of such
things in action, or pay at the time some part of the purchase money; but
when a sale is made by auction and entry is made by the auctioneer in his
sales book, at the time of the sale, of the amount and kind of property sold,
terms of sale, price, names of the purchasers and person on whose
account the sale is made, it is a sufficient memorandum:

(e) An agreement for the leasing for a longer period than one year, or for
the sale of real property or of an interest therein:

(f) a representation as to the credit of a third person.

(3) Those where both parties are incapable of giving consent to a contract.
(Art. 1403, civil Code.)

In the instant case, what appellant is trying to enforce is the delivery to him
of 3,000 square meters of land which he claims defendants promised to do
in consideration of his services as mediator or intermediary in effecting a
compromise of the civil action, Civil Case No. 135, between the defendants
and the Deudors. In no sense may such alleged contract be considered as
being a "sale of real property or of any interest therein." Indeed, not all
dealings involving interest in real property come under the Statute.

Moreover, appellant's complaint clearly alleges that he has already fulfilled

his part of the bargains to induce the Deudors to amicably settle their
differences with defendants as, in fact, on March 16, 1963, through his
efforts, a compromise agreement between these parties was approved by
the court. In other words, the agreement in question has already been
partially consummated, and is no longer merely executory. And it is likewise
a fundamental principle governing the application of the Statute that the
contract in dispute should be purely executory on the part of both parties
thereto.

We cannot, however, escape taking judicial notice, in relation to the

compromise agreement relied upon by appellant, that in several cases We
have decided, We have declared the same rescinded and of no effect. In J.
M. Tuason & Co., Inc. vs. Bienvenido Sanvictores, 4 SCRA 123, the Court
held:

It is also worthy of note that the compromise between Deudors and

Tuason, upon which Sanvictores predicates his right to buy the lot he
occupies, has been validly rescinded and set aside, as recognized by this
Court in its decision in G.R. No. L-13768, Deudor vs. Tuason, promulgated
on May 30, 1961.

We repeated this observation in J.M. Tuason & Co., Inc. vs. Teodosio
Macalindong, 6 SCRA 938. Thus, viewed from what would be the ultimate
conclusion of appellant's case, We entertain grave doubts as to whether or
not he can successfully maintain his alleged cause of action against
defendants, considering that the compromise agreement that he invokes
did not actually materialize and defendants have not benefited therefrom,
not to mention the undisputed fact that, as pointed out by appellees,
appellant's other attempt to secure the same 3,000 square meters via the
judicial enforcement of the compromise agreement in which they were
supposed to be reserved for him has already been repudiated by the
courts. (pp. 5-7. Brief of Appellee Gregorio Araneta, Inc.)

As regards appellant's third assignment of error, We hold that the

allegations in his complaint do not sufficiently Appellants' reliance. on
Article 2142 of Civil Code is misplaced. Said article provides:
Certain lawful, voluntary and unilateral acts give rise to the juridical relation
of quasi-contract to the end that no one shall be unjustly enriched or
benefited at the expense of another.

From the very language of this provision, it is obvious that a presumed

qauasi-contract cannot emerge as against one party when the subject
mater thereof is already covered by an existing contract with another party.
Predicated on the principle that no one should be allowed to unjustly enrich
himself at the expense of another, Article 2124 creates the legal fiction of a
quasi-contract precisely because of the absence of any actual agreement
between the parties concerned. Corollarily, if the one who claims having
enriched somebody has done so pursuant to a contract with a third party,
his cause of action should be against the latter, who in turn may, if there is
any ground therefor, seek relief against the party benefited. It is essential
that the act by which the defendant is benefited must have been voluntary
and unilateral on the part of the plaintiff. As one distinguished civilian puts
it, "The act is voluntary. because the actor in quasi-contracts is not bound
by any pre-existing obligation to act. It is unilateral, because it arises from
the sole will of the actor who is not previously bound by any reciprocal or
bilateral agreement. The reason why the law creates a juridical relations
and imposes certain obligation is to prevent a situation where a person is
able to benefit or take advantage of such lawful, voluntary and unilateral
acts at the expense of said actor." (Ambrosio Padilla, Civil Law, Vol. VI, p.
748, 1969 ed.) In the case at bar, since appellant has a clearer and more
direct recourse against the Deudors with whom he had entered into an
agreement regarding the improvements and expenditures made by him on
the land of appellees. it Cannot be said, in the sense contemplated in
Article 2142, that appellees have been enriched at the expense of
appellant.

In the ultimate. therefore, Our holding above that appellant's first two
assignments of error are well taken cannot save the day for him. Aside from
his having no cause of action against appellees, there is one plain error of
omission. We have found in the order of the trial court which is as good a
ground as any other for Us to terminate this case favorably to appellees. In
said order Which We have quoted in full earlier in this opinion, the trial
court ruled that "the grounds relied upon in said motion are mere
repetitions of those already resolved and discussed by this Court in the
order of August 13, 1964", an observation which We fully share. Virtually,
therefore. appellant's motion for reconsideration was ruled to be pro-forma.
Indeed, a cursory reading of the record on appeal reveals that appellant's
motion for reconsideration above-quoted contained exactly the same
arguments and manner of discussion as his February 6, 1964 "Opposition
to Motion to Dismiss" of defendant Gregorio Araneta, Inc. ((pp. 17-25, Rec.
on Appeal) as well as his February 17, 1964 "Opposition to Motion to
Dismiss of Defendant J. M. Tuason & Co." (pp. 33-45, Rec. on Appeal and
his February 29, 1964 "Rejoinder to Reply Oil Defendant J. M. Tuason &
Co." (pp. 52-64, Rec. on Appeal) We cannot see anything in said motion for
reconsideration that is substantially different from the above oppositions
and rejoinder he had previously submitted and which the trial court had
already considered when it rendered its main order of dismissal.
Consequently, appellant's motion for reconsideration did not suspend his
period for appeal. (Estrada vs. Sto. Domingo, 28 SCRA 890, 905-6.) And as
this point was covered by appellees' "Opposition to Motion for
Reconsideration" (pp. 8689), hence, within the frame of the issues below, it
is within the ambit of Our authority as the Supreme Court to consider the
same here even if it is not discussed in the briefs of the parties. (Insular Life
Assurance Co., Ltd. Employees Association-NATU vs. Insular Life
Assurance Co., Ltd. [Resolution en banc of March 10, 1977 in G. R. No.
L-25291).

Now, the impugned main order was issued on August 13, 1964, while the
appeal was made on September 24, 1964 or 42 days later. Clearly, this is
beyond the 30-day reglementary period for appeal. Hence, the subject
order of dismissal was already final and executory when appellant filed his
appeal.

WHEREFORE, the appeal of Faustino Cruz in this case is dismissed. No

costs.

Fernando (Chairman), Antonio, Aquino and Martin, .JJ., concur.

Concepcion, Jr., JJ., took no part.

Martin, J., was designated to sit in the Second Division.

—————————————————————————————————

Case 5. Gutierrez Hermanos vs Orense 28 Phil 571

EN BANC
G.R. No. L-9188 December 4, 1914
GUTIERREZ HERMANOS, plaintiff-appellee,
vs.
ENGRACIO ORENSE, defendant-appellant.
William A. Kincaid, Thos. L. Hartigan, and Ceferino M. Villareal for
appellant.

Rafael de la Sierra for appellee.

TORRES, J.:
Appeal through bill of exceptions filed by counsel for the appellant from the
judgment on April 14, 1913, by the Honorable P. M. Moir, judge, wherein he
sentenced the defendant to make immediate delivery of the property in
question, through a public instrument, by transferring and conveying to the
plaintiff all his rights in the property described in the complaint and to pay it
the sum of P780, as damages, and the costs of the suit.
On March 5, 1913, counsel for Gutierrez Hermanos filed a complaint,
afterwards amended, in the Court of First Instance of Albay against
Engacio Orense, in which he set forth that on and before February 14,
1907, the defendant Orense had been the owner of a parcel of land, with
the buildings and improvements thereon, situated in the pueblo of
Guinobatan, Albay, the location, area and boundaries of which were
specified in the complaint; that the said property has up to date been
recorded in the new property registry in the name of the said Orense,
according to certificate No. 5, with the boundaries therein given; that, on
February 14, 1907, Jose Duran, a nephew of the defendant, with the
latter's knowledge and consent, executed before a notary a public
instrument whereby he sold and conveyed to the plaintiff company, for
P1,500, the aforementioned property, the vendor Duran reserving to
himself the right to repurchase it for the same price within a period of four
years from the date of the said instrument; that the plaintiff company had
not entered into possession of the purchased property, owing to its
continued occupancy by the defendant and his nephew, Jose Duran, by
virtue of a contract of lease executed by the plaintiff to Duran, which
contract was in force up to February 14, 1911; that the said instrument of
sale of the property, executed by Jose Duran, was publicly and freely
confirmed and ratified by the defendant Orense; that, in order to perfect the
title to the said property, but that the defendant Orense refused to do so,
without any justifiable cause or reason, wherefore he should be compelled
to execute the said deed by an express order of the court, for Jose Duran is
notoriously insolvent and cannot reimburse the plaintiff company for the
price of the sale which he received, nor pay any sum whatever for the
losses and damages occasioned by the said sale, aside from the fact that
the plaintiff had suffered damage by losing the present value of the
property, which was worth P3,000; that, unless such deed of final
conveyance were executed in behalf of the plaintiff company, it would be
injured by the fraud perpetrated by the vendor, Duran, in connivance with
the defendant; that the latter had been occupying the said property since
February 14, 1911, and refused to pay the rental thereof, notwithstanding
the demand made upon him for its payment at the rate of P30 per month,
the just and reasonable value for the occupancy of the said property, the
possession of which the defendant likewise refused to deliver to the plaintiff
company, in spite of the continuous demands made upon him, the
defendant, with bad faith and to the prejudice of the firm of Gutierrez
Hermanos, claiming to have rights of ownership and possession in the said
property. Therefore it was prayed that judgment be rendered by holding that
the land and improvements in question belong legitimately and exclusively
to the plaintiff, and ordering the defendant to execute in the plaintiff's behalf
the said instrument of transfer and conveyance of the property and of all
the right, interest, title and share which the defendant has therein; that the
defendant be sentenced to pay P30 per month for damages and rental of
the property from February 14, 1911, and that, in case these remedies
were not granted to the plaintiff, the defendant be sentenced to pay to it the
sum of P3,000 as damages, together with interest thereon since the date of
the institution of this suit, and to pay the costs and other legal expenses.
The demurrer filed to the amended complaint was overruled, with exception
on the part of the defendant, whose counsel made a general denial of the
allegations contained in the complaint, excepting those that were admitted,
and specifically denied paragraph 4 thereof to the effect that on February
14, 1907, Jose Duran executed the deed of sale of the property in favor of
the plaintiff with the defendant's knowledge and consent. 1awphil.net

As the first special defense, counsel for the defendant alleged that the facts
set forth in the complaint with respect to the execution of the deed did not
constitute a cause of action, nor did those alleged in the other form of
action for the collection of P3,000, the value of the realty.
As the second special defense, he alleged that the defendant was the
lawful owner of the property claimed in the complaint, as his ownership was
recorded in the property registry, and that, since his title had been
registered under the proceedings in rem prescribed by Act No. 496, it was
conclusive against the plaintiff and the pretended rights alleged to have
been acquired by Jose Duran prior to such registration could not now
prevail; that the defendant had not executed any written power of attorney
nor given any verbal authority to Jose Duran in order that the latter might,
in his name and representation, sell the said property to the plaintiff
company; that the defendant's knowledge of the said sale was acquired
long after the execution of the contract of sale between Duran and
Gutierrez Hermanos, and that prior thereto the defendant did not
intentionally and deliberately perform any act such as might have induced
the plaintiff to believe that Duran was empowered and authorized by the
defendant and which would warrant him in acting to his own detriment,
under the influence of that belief. Counsel therefore prayed that the
defendant be absolved from the complaint and that the plaintiff be
sentenced to pay the costs and to hold his peace forever.
After the hearing of the case and an examination of the evidence
introduced by both parties, the court rendered the judgment
aforementioned, to which counsel for the defendant excepted and moved
for a new trial. This motion was denied, an exception was taken by the
defendant and, upon presentation of the proper bill of exceptions, the same
was approved, certified and forwarded to the clerk of his court.
This suit involves the validity and efficacy of the sale under right of
redemption of a parcel of land and a masonry house with the nipa roof
erected thereon, effected by Jose Duran, a nephew of the owner of the
property, Engracio Orense, for the sum of P1,500 by means of a notarial
instrument executed and ratified on February 14, 1907.
After the lapse of the four years stipulated for the redemption, the
defendant refused to deliver the property to the purchaser, the firm of
Gutierrez Hermanos, and to pay the rental thereof at the rate of P30 per
month for its use and occupation since February 14, 1911, when the period
for its repurchase terminated. His refusal was based on the allegations that
he had been and was then the owner of the said property, which was
registered in his name in the property registry; that he had not executed
any written power of attorney to Jose Duran, nor had he given the latter any
verbal authorization to sell the said property to the plaintiff firm in his name;
and that, prior to the execution of the deed of sale, the defendant
performed no act such as might have induced the plaintiff to believe that
Jose Duran was empowered and authorized by the defendant to effect the
said sale.
The plaintiff firm, therefore, charged Jose Duran, in the Court of First
Instance of the said province, with estafa, for having represented himself in
the said deed of sale to be the absolute owner of the aforesaid land and
improvements, whereas in reality they did not belong to him, but to the
defendant Orense. However, at the trial of the case Engracio Orense,
called as a witness, being interrogated by the fiscal as to whether he and
consented to Duran's selling the said property under right of redemption to
the firm of Gutierrez Hermanos, replied that he had. In view of this
statement by the defendant, the court acquitted Jose Duran of the charge
of estafa.
As a result of the acquittal of Jose Duran, based on the explicit testimony of
his uncle, Engacio Orense, the owner of the property, to the effect that he
had consented to his nephew Duran's selling the property under right of
repurchase to Gutierrez Hermanos, counsel for this firm filed a complainant
praying, among other remedies, that the defendant Orense be compelled to
execute a deed for the transfer and conveyance to the plaintiff company of
all the right, title and interest with Orense had in the property sold, and to
pay to the same the rental of the property due from February 14, 1911. itc-alf

Notwithstanding the allegations of the defendant, the record in this case

shows that he did give his consent in order that his nephew, Jose Duran,
might sell the property in question to Gutierrez Hermanos, and that he did
thereafter confirm and ratify the sale by means of a public instrument
executed before a notary.
It having been proven at the trial that he gave his consent to the said sale,
it follows that the defendant conferred verbal, or at least implied, power of
agency upon his nephew Duran, who accepted it in the same way by
selling the said property. The principal must therefore fulfill all the
obligations contracted by the agent, who acted within the scope of his
authority. (Civil Code, arts. 1709, 1710 and 1727.)
Even should it be held that the said consent was granted subsequently to
the sale, it is unquestionable that the defendant, the owner of the property,
approved the action of his nephew, who in this case acted as the manager
of his uncle's business, and Orense'r ratification produced the effect of an
express authorization to make the said sale. (Civil Code, arts. 1888 and
1892.)
Article 1259 of the Civil Code prescribes: "No one can contract in the name
of another without being authorized by him or without his legal
representation according to law.
A contract executed in the name of another by one who has neither his
authorization nor legal representation shall be void, unless it should be
ratified by the person in whose name it was executed before being revoked
by the other contracting party.
The sworn statement made by the defendant, Orense, while testifying as a
witness at the trial of Duran for estafa, virtually confirms and ratifies the
sale of his property effected by his nephew, Duran, and, pursuant to article
1313 of the Civil Code, remedies all defects which the contract may have
contained from the moment of its execution.
The sale of the said property made by Duran to Gutierrez Hermanos was
indeed null and void in the beginning, but afterwards became perfectly valid
and cured of the defect of nullity it bore at its execution by the confirmation
solemnly made by the said owner upon his stating under oath to the judge
that he himself consented to his nephew Jose Duran's making the said
sale. Moreover, pursuant to article 1309 of the Code, the right of action for
nullification that could have been brought became legally extinguished from
the moment the contract was validly confirmed and ratified, and, in the
present case, it is unquestionable that the defendant did confirm the said
contract of sale and consent to its execution.
On the testimony given by Engacio Orense at the trial of Duran for estafa,
the latter was acquitted, and it would not be just that the said testimony,
expressive of his consent to the sale of his property, which determined the
acquittal of his nephew, Jose Duran, who then acted as his business
manager, and which testimony wiped out the deception that in the
beginning appeared to have been practiced by the said Duran, should not
now serve in passing upon the conduct of Engracio Orense in relation to
the firm of Gutierrez Hermanos in order to prove his consent to the sale of
his property, for, had it not been for the consent admitted by the defendant
Orense, the plaintiff would have been the victim of estafa.
If the defendant Orense acknowledged and admitted under oath that he
had consented to Jose Duran's selling the property in litigation to Gutierrez
Hermanos, it is not just nor is it permissible for him afterward to deny that
admission, to the prejudice of the purchaser, who gave P1,500 for the said
property.
The contract of sale of the said property contained in the notarial
instrument of February 14, 1907, is alleged to be invalid, null and void
under the provisions of paragraph 5 of section 335 of the Code of Civil
Procedure, because the authority which Orense may have given to Duran
to make the said contract of sale is not shown to have been in writing and
signed by Orense, but the record discloses satisfactory and conclusive
proof that the defendant Orense gave his consent to the contract of sale
executed in a public instrument by his nephew Jose Duran. Such consent
was proven in a criminal action by the sworn testimony of the principal and
presented in this civil suit by other sworn testimony of the same principal
and by other evidence to which the defendant made no objection.
Therefore the principal is bound to abide by the consequences of his
agency as though it had actually been given in writing (Conlu vs. Araneta
and Guanko, 15 Phil. Rep., 387; Gallemit vs. Tabiliran, 20 Phil. Rep., 241;
Kuenzle & Streiff vs. Jiongco, 22 Phil. Rep., 110.)
The repeated and successive statements made by the defendant Orense in
two actions, wherein he affirmed that he had given his consent to the sale
of his property, meet the requirements of the law and legally excuse the
lack of written authority, and, as they are a full ratification of the acts
executed by his nephew Jose Duran, they produce the effects of an
express power of agency.
The judgment appealed from in harmony with the law and the merits of the
case, and the errors assigned thereto have been duly refuted by the
foregoing considerations, so it should be affirmed.
The judgment appealed from is hereby affirmed, with the costs against the
appellant.
Arellano, C.J., Johnson, Carson, Moreland and Araullo, JJ., concur.

—————————————————————————————————

Case 6. Adille vs CA 157 SCRA 455

SECOND DIVISION

G.R. No. L-44546 January 29, 1988

RUSTICO ADILLE, petitioner, 


vs.

THE HONORABLE COURT OF APPEALS, EMETERIA ASEJO,
TEODORICA ASEJO, DOMINGO ASEJO, JOSEFA ASEJO and
SANTIAGO ASEJO, respondents.

SARMIENTO, J.:
In issue herein are property and property rights, a familiar subject of controversy and a wellspring of enormous
conflict that has led not only to protracted legal entanglements but to even more bitter consequences, like strained
relationships and even the forfeiture of lives. It is a question that likewise reflects a tragic commentary on prevailing
social and cultural values and institutions, where, as one observer notes, wealth and its accumulation are the basis of
self-fulfillment and where property is held as sacred as life itself. "It is in the defense of his property," says this
modern thinker, that one "will mobilize his deepest protective devices, and anybody that threatens his possessions
will arouse his most passionate enmity." 1
The task of this Court, however, is not to judge the wisdom of values; the
burden of reconstructing the social order is shouldered by the political
leadership-and the people themselves.

The parties have come to this Court for relief and accordingly, our
responsibility is to give them that relief pursuant to the decree of law.

The antecedent facts are quoted from the decision 2 appealed from:

xxx xxx xxx

... [T]he land in question Lot 14694 of Cadastral Survey of Albay located in
Legaspi City with an area of some 11,325 sq. m. originally belonged to one
Felisa Alzul as her own private property; she married twice in her lifetime;
the first, with one Bernabe Adille, with whom she had as an only child,
herein defendant Rustico Adille; in her second marriage with one Procopio
Asejo, her children were herein plaintiffs, — now, sometime in 1939, said
Felisa sold the property in pacto de retro to certain 3rd persons, period of
repurchase being 3 years, but she died in 1942 without being able to
redeem and after her death, but during the period of redemption, herein
defendant repurchased, by himself alone, and after that, he executed a
deed of extra-judicial partition representing himself to be the only heir and
child of his mother Felisa with the consequence that he was able to secure
title in his name alone also, so that OCT. No. 21137 in the name of his
mother was transferred to his name, that was in 1955; that was why after
some efforts of compromise had failed, his half-brothers and sisters, herein
plaintiffs, filed present case for partition with accounting on the position that
he was only a trustee on an implied trust when he redeemed,-and this is
the evidence, but as it also turned out that one of plaintiffs, Emeteria Asejo
was occupying a portion, defendant counterclaimed for her to vacate that,
—

Well then, after hearing the evidence, trial Judge sustained defendant in his
position that he was and became absolute owner, he was not a trustee, and
therefore, dismissed case and also condemned plaintiff occupant, Emeteria
to vacate; it is because of this that plaintiffs have come here and contend
that trial court erred in:

I. ... declaring the defendant absolute owner of the property;

II. ... not ordering the partition of the property; and

III. ... ordering one of the plaintiffs who is in possession of the portion of the
property to vacate the land, p. 1 Appellant's brief.

which can be reduced to simple question of whether or not on the basis of

evidence and law, judgment appealed from should be maintained. 3

xxx xxx xxx

The respondent Court of appeals reversed the trial Court, 4 and ruled for the
plaintiffs-appellants, the private respondents herein. The petitioner now
appeals, by way of certiorari, from the Court's decision.

We required the private respondents to file a comment and thereafter,

having given due course to the petition, directed the parties to file their
briefs. Only the petitioner, however, filed a brief, and the private
respondents having failed to file one, we declared the case submitted for
decision.

The petition raises a purely legal issue: May a co-owner acquire exclusive
ownership over the property held in common?

Essentially, it is the petitioner's contention that the property subject of

dispute devolved upon him upon the failure of his co-heirs to join him in its
redemption within the period required by law. He relies on the provisions of
Article 1515 of the old Civil Article 1613 of the present Code, giving the
vendee a retro the right to demand redemption of the entire property.

There is no merit in this petition.

The right of repurchase may be exercised by a co-owner with aspect to his

share alone. 5 While the records show that the petitioner redeemed the
property in its entirety, shouldering the expenses therefor, that did not make
him the owner of all of it. In other words, it did not put to end the existing
state of co-ownership.

Necessary expenses may be incurred by one co-owner, subject to his right

to collect reimbursement from the remaining co-owners. 6 There is no doubt
that redemption of property entails a necessary expense. Under the Civil
Code:
ART. 488. Each co-owner shall have a right to compel the other co-owners
to contribute to the expenses of preservation of the thing or right owned in
common and to the taxes. Any one of the latter may exempt himself from
this obligation by renouncing so much of his undivided interest as may be
equivalent to his share of the expenses and taxes. No such waiver shall be
made if it is prejudicial to the co-ownership.

The result is that the property remains to be in a condition of co-ownership.

While a vendee a retro, under Article 1613 of the Code, "may not be
compelled to consent to a partial redemption," the redemption by one co-
heir or co-owner of the property in its totality does not vest in him
ownership over it. Failure on the part of all the co-owners to redeem it
entitles the vendee a retro to retain the property and consolidate title
thereto in his name. 7 But the provision does not give to the redeeming co-
owner the right to the entire property. It does not provide for a mode of
terminating a co-ownership.

Neither does the fact that the petitioner had succeeded in securing title
over the parcel in his name terminate the existing co-ownership. While his
half-brothers and sisters are, as we said, liable to him for reimbursement as
and for their shares in redemption expenses, he cannot claim exclusive
right to the property owned in common. Registration of property is not a
means of acquiring ownership. It operates as a mere notice of existing title,
that is, if there is one.

The petitioner must then be said to be a trustee of the property on behalf of

the private respondents. The Civil Code states:

ART. 1456. If property is acquired through mistake or fraud, the person

obtaining it is, by force of law, considered a trustee of an implied trust for
the benefit of the person from whom the property comes.

We agree with the respondent Court of Appeals that fraud attended the
registration of the property. The petitioner's pretension that he was the sole
heir to the land in the affidavit of extrajudicial settlement he executed
preliminary to the registration thereof betrays a clear effort on his part to
defraud his brothers and sisters and to exercise sole dominion over the
property. The aforequoted provision therefore applies.

It is the view of the respondent Court that the petitioner, in taking over the
property, did so either on behalf of his co-heirs, in which event, he had
constituted himself a negotiorum gestor under Article 2144 of the Civil
Code, or for his exclusive benefit, in which case, he is guilty of fraud, and
must act as trustee, the private respondents being the beneficiaries, under
the Article 1456. The evidence, of course, points to the second alternative
the petitioner having asserted claims of exclusive ownership over the
property and having acted in fraud of his co-heirs. He cannot therefore be
said to have assume the mere management of the property abandoned by
his co-heirs, the situation Article 2144 of the Code contemplates. In any
case, as the respondent Court itself affirms, the result would be the same
whether it is one or the other. The petitioner would remain liable to the
Private respondents, his co-heirs.

This Court is not unaware of the well-established principle that prescription

bars any demand on property (owned in common) held by another (co-
owner) following the required number of years. In that event, the party in
possession acquires title to the property and the state of co-ownership is
ended . 8 In the case at bar, the property was registered in 1955 by the
petitioner, solely in his name, while the claim of the private respondents
was presented in 1974. Has prescription then, set in?

We hold in the negative. Prescription, as a mode of terminating a relation of

co-ownership, must have been preceded by repudiation (of the co-
ownership). The act of repudiation, in turn is subject to certain conditions:
(1) a co-owner repudiates the co-ownership; (2) such an act of repudiation
is clearly made known to the other co-owners; (3) the evidence thereon is
clear and conclusive, and (4) he has been in possession through open,
continuous, exclusive, and notorious possession of the property for the
period required by law. 9

The instant case shows that the petitioner had not complied with these
requisites. We are not convinced that he had repudiated the co-ownership;
on the contrary, he had deliberately kept the private respondents in the
dark by feigning sole heirship over the estate under dispute. He cannot
therefore be said to have "made known" his efforts to deny the co-
ownership. Moreover, one of the private respondents, Emeteria Asejo, is
occupying a portion of the land up to the present, yet, the petitioner has not
taken pains to eject her therefrom. As a matter of fact, he sought to recover
possession of that portion Emeteria is occupying only as a counterclaim,
and only after the private respondents had first sought judicial relief.
It is true that registration under the Torrens system is constructive notice of
title, 10 but it has likewise been our holding that the Torrens title does not
furnish a shield for fraud. 11 It is therefore no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was one,
notwithstanding the long-standing rule that registration operates as a
universal notice of title.

For the same reason, we cannot dismiss the private respondents' claims
commenced in 1974 over the estate registered in 1955. While actions to
enforce a constructive trust prescribes in ten years, 12 reckoned from the
date of the registration of the property, 13 we, as we said, are not prepared
to count the period from such a date in this case. We note the
petitioner's sub rosa efforts to get hold of the property exclusively for
himself beginning with his fraudulent misrepresentation in his unilateral
affidavit of extrajudicial settlement that he is "the only heir and child of his
mother Feliza with the consequence that he was able to secure title in his
name also." 14 Accordingly, we hold that the right of the private respondents
commenced from the time they actually discovered the petitioner's act of
defraudation. 15 According to the respondent Court of Appeals, they "came
to know [of it] apparently only during the progress of the litigation." 16 Hence,
prescription is not a bar.

Moreover, and as a rule, prescription is an affirmative defense that must be

pleaded either in a motion to dismiss or in the answer otherwise it is
deemed waived, 17 and here, the petitioner never raised that
defense. 18 There are recognized exceptions to this rule, but the petitioner
has not shown why they apply.

WHEREFORE, there being no reversible error committed by the

respondent Court of Appeals, the petition is DENIED. The Decision sought
to be reviewed is hereby AFFIRMED in toto. No pronouncement as to
costs.

SO ORDERED,

Yap (Chairman), Melencio-Herrera, Paras and Padilla, JJ., concur.

—————————————————————————————————
Case 7. Andres vs Mantrust 177 SCRA 618 (1989)

THIRD DIVISION

G.R. No. 82670 September 15, 1989

DOMETILA M. ANDRES, doing business under the name and style

"IRENE'S WEARING APPAREL," petitioner, 

vs.

MANUFACTURERS HANOVER & TRUST CORPORATION and COURT
OF APPEALS, respondents.

Roque A. Tamayo for petitioner.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for private

respondent.

CORTES, J.:

Assailed in this petition for review on certiorari is the judgment of the Court
of Appeals, which, applying the doctrine of solutio indebiti, reversed the
decision of the Regional Trial Court, Branch CV, Quezon City by deciding in
favor of private respondent.

Petitioner, using the business name "Irene's Wearing Apparel," was

engaged in the manufacture of ladies garments, children's wear, men's
apparel and linens for local and foreign buyers. Among its foreign buyers
was Facets Funwear, Inc. (hereinafter referred to as FACETS) of the United
States.

In the course of the business transaction between the two, FACETS from
time to time remitted certain amounts of money to petitioner in payment for
the items it had purchased. Sometime in August 1980, FACETS instructed
the First National State Bank of New Jersey, Newark, New Jersey, U.S.A.
(hereinafter referred to as FNSB) to transfer $10,000.00 to petitioner via
Philippine National Bank, Sta. Cruz Branch, Manila (hereinafter referred to
as PNB).
Acting on said instruction, FNSB instructed private respondent
Manufacturers Hanover and Trust Corporation to effect the above-
mentioned transfer through its facilities and to charge the amount to the
account of FNSB with private respondent. Although private respondent was
able to send a telex to PNB to pay petitioner $10,000.00 through the
Pilipinas Bank, where petitioner had an account, the payment was not
effected immediately because the payee designated in the telex was only
"Wearing Apparel." Upon query by PNB, private respondent sent PNB
another telex dated August 27, 1980 stating that the payment was to be
made to "Irene's Wearing Apparel." On August 28, 1980, petitioner received
the remittance of $10,000.00 through Demand Draft No. 225654 of the
PNB.

Meanwhile, on August 25, 1980, after learning about the delay in the
remittance of the money to petitioner, FACETS informed FNSB about the
situation. On September 8, 1980, unaware that petitioner had already
received the remittance, FACETS informed private respondent about the
delay and at the same time amended its instruction by asking it to effect the
payment through the Philippine Commercial and Industrial Bank
(hereinafter referred to as PCIB) instead of PNB.

Accordingly, private respondent, which was also unaware that petitioner

had already received the remittance of $10,000.00 from PNB instructed the
PCIB to pay $10,000.00 to petitioner. Hence, on September 11, 1980,
petitioner received a second $10,000.00 remittance.

Private respondent debited the account of FNSB for the second $10,000.00
remittance effected through PCIB. However, when FNSB discovered that
private respondent had made a duplication of the remittance, it asked for a
recredit of its account in the amount of $10,000.00. Private respondent
complied with the request.

Private respondent asked petitioner for the return of the second remittance
of $10,000.00 but the latter refused to pay. On May 12, 1982 a complaint
was filed with the Regional Trial Court, Branch CV, Quezon City which was
decided in favor of petitioner as defendant. The trial court ruled that Art.
2154 of the New Civil Code is not applicable to the case because the
second remittance was made not by mistake but by negligence and
petitioner was not unjustly enriched by virtue thereof [Record, p. 234]. On
appeal, the Court of Appeals held that Art. 2154 is applicable and reversed
the RTC decision. The dispositive portion of the Court of Appeals' decision
reads as follows:

WHEREFORE, the appealed decision is hereby REVERSED and SET

ASIDE and another one entered in favor of plaintiff-appellant and against
defendant-appellee Domelita (sic) M. Andres, doing business under the
name and style "Irene's Wearing Apparel" to reimburse and/or return to
plaintiff-appellant the amount of $10,000.00, its equivalent in Philippine
currency, with interests at the legal rate from the filing of the complaint on
May 12, 1982 until the whole amount is fully paid, plus twenty percent
(20%) of the amount due as attomey's fees; and to pay the costs.

With costs against defendant-appellee.

SO ORDERED. [Rollo, pp. 29-30.]

Thereafter, this petition was filed. The sole issue in this case is whether or
not the private respondent has the right to recover the second $10,000.00
remittance it had delivered to petitioner. The resolution of this issue would
hinge on the applicability of Art. 2154 of the New Civil Code which provides
that:

Art. 2154. If something received when there is no right to demand it, and it
was unduly delivered through mistake, the obligation to return it arises.

This provision is taken from Art. 1895 of the Spanish Civil Code which
provided that:

Art. 1895. If a thing is received when there was no right to claim it and
which, through an error, has been unduly delivered, an obligation to restore
it arises.

In Velez v. Balzarza, 73 Phil. 630 (1942), the Court, speaking through Mr.
Justice Bocobo explained the nature of this article thus:

Article 1895 [now Article 2154] of the Civil Code abovequoted, is therefore
applicable. This legal provision, which determines the quasi-contract of
solution indebiti, is one of the concrete manifestations of the ancient
principle that no one shall enrich himself unjustly at the expense of another.
In the Roman Law Digest the maxim was formulated thus: "Jure naturae
acquum est, neminem cum alterius detrimento et injuria fieri
locupletiorem." And the Partidas declared: "Ninguno non deue
enriquecerse tortizeramente con dano de otro." Such axiom has grown
through the centuries in legislation, in the science of law and in court
decisions. The lawmaker has found it one of the helpful guides in framing
statutes and codes. Thus, it is unfolded in many articles scattered in the
Spanish Civil Code. (See for example, articles, 360, 361, 464, 647, 648,
797, 1158, 1163, 1295, 1303, 1304, 1893 and 1895, Civil Code.) This time-
honored aphorism has also been adopted by jurists in their study of the
conflict of rights. It has been accepted by the courts, which have not
hesitated to apply it when the exigencies of right and equity demanded its
assertion. It is a part of that affluent reservoir of justice upon which judicial
discretion draws whenever the statutory laws are inadequate because they
do not speak or do so with a confused voice. [at p. 632.]

For this article to apply the following requisites must concur: "(1) that he
who paid was not under obligation to do so; and, (2) that payment was
made by reason of an essential mistake of fact" [City of Cebu v. Piccio, 110
Phil. 558, 563 (1960)].

It is undisputed that private respondent delivered the second $10,000.00

remittance. However, petitioner contends that the doctrine of solutio
indebiti, does not apply because its requisites are absent.

First, it is argued that petitioner had the right to demand and therefore to
retain the second $10,000.00 remittance. It is alleged that even after the
two $10,000.00 remittances are credited to petitioner's receivables from
FACETS, the latter allegedly still had a balance of $49,324.00. Hence, it is
argued that the last $10,000.00 remittance being in payment of a pre-
existing debt, petitioner was not thereby unjustly enriched.

The contention is without merit.

The contract of petitioner, as regards the sale of garments and other textile
products, was with FACETS. It was the latter and not private respondent
which was indebted to petitioner. On the other hand, the contract for the
transmittal of dollars from the United States to petitioner was entered into
by private respondent with FNSB. Petitioner, although named as the payee
was not privy to the contract of remittance of dollars. Neither was private
respondent a party to the contract of sale between petitioner and FACETS.
There being no contractual relation between them, petitioner has no right to
apply the second $10,000.00 remittance delivered by mistake by private
respondent to the outstanding account of FACETS.

Petitioner next contends that the payment by respondent bank of the

second $10,000.00 remittance was not made by mistake but was the result
of negligence of its employees. In connection with this the Court of Appeals
made the following finding of facts:

The fact that Facets sent only one remittance of $10,000.00 is not disputed.
In the written interrogatories sent to the First National State Bank of New
Jersey through the Consulate General of the Philippines in New York,
Adelaide C. Schachel, the investigation and reconciliation clerk in the said
bank testified that a request to remit a payment for Facet Funwear Inc. was
made in August, 1980. The total amount which the First National State
Bank of New Jersey actually requested the plaintiff-appellant
Manufacturers Hanover & Trust Corporation to remit to Irene's Wearing
Apparel was US $10,000.00. Only one remittance was requested by First
National State Bank of New Jersey as per instruction of Facets Funwear
(Exhibit "J", pp. 4-5).

That there was a mistake in the second remittance of US $10,000.00 is

borne out by the fact that both remittances have the same reference
invoice number which is 263 80. (Exhibits "A-1- Deposition of Mr. Stanley
Panasow" and "A-2-Deposition of Mr. Stanley Panasow").

Plaintiff-appellant made the second remittance on the wrong assumption

that defendant-appellee did not receive the first remittance of US
$10,000.00. [Rollo, pp. 26-27.]

It is evident that the claim of petitioner is anchored on the appreciation of

the attendant facts which petitioner would have this Court review. The
Court holds that the finding by the Court of Appeals that the second
$10,000.00 remittance was made by mistake, being based on substantial
evidence, is final and conclusive. The rule regarding questions of fact being
raised with this Court in a petition for certiorari under Rule 45 of the
Revised Rules of Court has been stated in Remalante v. Tibe, G.R. No.
59514, February 25, 1988, 158 SCRA 138, thus:

The rule in this jurisdiction is that only questions of law may be raised in a
petition for certiorari under Rule 45 of the Revised Rules of Court. "The
jurisdiction of the Supreme Court in cases brought to it from the Court of
Appeals is limited to reviewing and revising the errors of law imputed to it,
its findings of fact being conclusive" [Chan v. Court of Appeals, G.R. No.
L-27488, June 30, 1970, 33 SCRA 737, reiterating a long line of decisions].
This Court has emphatically declared that "it is not the function of the
Supreme Court to analyze or weigh such evidence all over again, its
jurisdiction being limited to reviewing errors of law that might have been
committed by the lower court" [Tiongco v. De la Merced, G.R. No. L-24426,
July 25, 1974, 58 SCRA 89; Corona v. Court of Appeals, G.R. No. L-62482,
April 28, 1983, 121 SCRA 865; Baniqued v. Court of Appeals, G. R. No.
L-47531, February 20, 1984, 127 SCRA 596]. "Barring, therefore, a
showing that the findings complained of are totally devoid of support in the
record, or that they are so glaringly erroneous as to constitute serious
abuse of discretion, such findings must stand, for this Court is not expected
or required to examine or contrast the oral and documentary evidence
submitted by the parties" [Santa Ana, Jr. v. Hernandez, G.R. No. L-16394,
December 17, 1966, 18 SCRA 9731. [at pp. 144-145.]

Petitioner invokes the equitable principle that when one of two innocent
persons must suffer by the wrongful act of a third person, the loss must be
borne by the one whose negligence was the proximate cause of the loss.

The rule is that principles of equity cannot be applied if there is a provision

of law specifically applicable to a case [Phil. Rabbit Bus Lines, Inc. v.
Arciaga, G.R. No. L-29701, March 16, 1987,148 SCRA 433; Zabat, Jr. v.
Court of Appeals, G.R. No. L36958, July 10, 1986, 142 SCRA 587; Rural
Bank of Paranaque, Inc. v. Remolado, G.R. No. 62051, March 18, 1985,
135 SCRA 409; Cruz v. Pahati, 98 Phil. 788 (1956)]. Hence, the Court in
the case of De Garcia v. Court of Appeals, G.R. No. L-20264, January 30,
1971, 37 SCRA 129, citing Aznar v. Yapdiangco, G.R. No. L-18536, March
31, 1965, 13 SCRA 486, held:

... The common law principle that where one of two innocent persons must
suffer by a fraud perpetrated by another, the law imposes the loss upon the
party who, by his misplaced confidence, has enabled the fraud to be
committed, cannot be applied in a case which is covered by an express
provision of the new Civil Code, specifically Article 559. Between a
common law principle and a statutory provision, the latter must prevail in
this jurisdiction. [at p. 135.]
Having shown that Art. 2154 of the Civil Code, which embodies the doctrine
of solutio indebiti, applies in the case at bar, the Court must reject the
common law principle invoked by petitioner.

Finally, in her attempt to defeat private respondent's claim, petitioner makes

much of the fact that from the time the second $10,000.00 remittance was
made, five hundred and ten days had elapsed before private respondent
demanded the return thereof. Needless to say, private respondent instituted
the complaint for recovery of the second $10,000.00 remittance well within
the six years prescriptive period for actions based upon a quasi-contract
[Art. 1145 of the New Civil Code].

WHEREFORE, the petition is DENIED and the decision of the Court of

Appeals is hereby AFFIRMED.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr. and Bidin, JJ., concur.

Feliciano, J., is on leave.

—————————————————————————————————

Case 8. Puyat & Sons vs Manila 7 SCRA 970

EN BANC

G.R. No. L-17447 April 30, 1963

GONZALO PUYAT & SONS, INC., plaintiff-appelle, 


vs.

CITY OF MANILA AND MARCELO SARMIENTO, as City Treasurer of
Manila, defendants-appellants

Feria, Manglapus & Associates for plainttiff-appelle.Asst. City Fiscal Manuel

T. Reyes for defendants-appellants.

PAREDES, J.:

This is an appeal from the judgment of the CFI of Manila, the dispostive
portion of which reads:
"xxx Of the payments made by the plaintiff, only that made on October 25,
1950 in the amount of P1,250.00 has prescribed Payments made in 1951
and thereafter are still recoverable since the extra-judicial demand made on
October 30, 1956 was well within the six-year prescriptive period of the
New CivilCode.

In view of the foregoing considerations, judgment is hereby rendered in

favor of the plaintiff, ordering the defendants to refund the amount of
P29,824.00, without interest. No costs.

Wherefore, the parties respectfully pray that the foregoing stipulation of

facts be admitted and approved by this Honorable Court, without prejudice
to the parties adducing other evidence to prove their case not covered by
this stipulation of facts.
1äwphï1.ñët

Defendants' counterclaim is hereby dismissed for not having been

substantiated."

On August 11, 1958, the plaintiff Gonzalo Puyat & Sons, Inc., filed an action
for refund of Retail DealerlsTaxes paid by it, corresponding to the first
Quarter of 1950 up to the third Quarter of 1956, amounting to P33,785.00,
against the City of Manila and its City Treasurer.The case was submitted on
the following stipulation of facts, to wit--

"1. That the plaintiff is a corporation duly organized and existing according
to the laws of the Philippines, with offices at Manila; while defendant City
Manila is a Municipal Corporation duly organized in accordance with the
laws of the Philippines, and defendant Marcelino Sarmiento is the
dulyqualified incumbent City Treasurer of Manila;

"2. That plaintiff is engaged in the business of manufacturing and selling all
kinds of furniture at its factory at 190 Rodriguez-Arias, San Miguel, Manila,
and has a display room located at 604-606 Rizal Avenue, Manila, wherein it
displays the various kind of furniture manufactured by it and sells some
goods imported by it, such as billiard balls, bowling balls and other
accessories;

"3. That acting pursuant to the provisions of Sec. 1. group II, of Ordinance
No. 3364, defendant City Treasurer of Manilaassessed from plaintiff retail
dealer's tax corresponding to the quarters hereunder stated on the sales of
furniture manufactured and sold by it at its factory site, all of which
assessments plaintiff paid without protest in the erroneous belief that it was
liable therefor, on the dates and in the amount enumerated herein below:

Amount
Period Date Paid O.R. No. Assessed
and Paid.
First Quarter 1950 Jan. 25, 1950 436271X P1,255.00
Second Quarter 1950 Apr. 25, 1950 215895X 1,250.00
Third Quarter 1950 Jul. 25, 1950 243321X 1,250.00
Fourth Quarter 1950 Oct. 25, 1950 271165X 1,250.00
(Follows the assessment for different quarters in 1951, 1952,

1953, 1954 and 1955, fixing the same amount quarterly.) x x x..
First Quarter 1956 Jan. 25, 1956 823047X 1,250.00
Second Quarter 1956 Apr. 25, 1956 855949X 1,250.00
Third Quarter 1956 Jul. 25, 1956 880789X 1,250.00
P33,785.00
TOTAL .............
===========

"4. That plaintiff, being a manufacturer of various kinds of furniture, is

exempt from the payment of taxes imposed under the provisions of Sec. 1,
Group II, of Ordinance No. 3364,which took effect on September 24, 1956,
on the sale of the various kinds of furniture manufactured by it pursuant to
the provisions of Sec. 18(n) of Republic Act No. 409 (Revised Charter of
Manila), as restated in Section 1 of Ordinance No.3816.

"5. That, however, plaintiff, is liable for the payment of taxes prescribed in
Section 1, Group II or Ordinance No. 3364mas amended by Sec. 1, Group
II of Ordinance No. 3816, which took effect on September 24, 1956, on the
sales of imported billiard balls, bowling balls and other accessories at its
displayroom. The taxes paid by the plaintiff on the sales of said article are
as follows:

xxx xxx xxx

"6. That on October 30, 1956, the plaintiff filed with defendant City
Treasurer of Manila, a formal request for refund of the retail dealer's taxes
unduly paid by it as aforestated in paragraph 3, hereof.

"7. That on July 24, 1958, the defendant City Treasurer of Maniladefinitely
denied said request for refund.

"8. Hence on August 21, 1958, plaintiff filed the present complaint.

"9. Based on the above stipulation of facts, the legal issues to be resolved
by this Honorable Court are: (1) the period of prescription applicable in
matters of refund of municipal taxes errenously paid by a taxpayer and (2)
refund of taxes not paid under protest. x x x."

Said judgment was directly appealed to this Court on two dominant issues
to wit: (1) Whether or not the amounts paid by plaintiff-appelle, as retail
dealer's taxes under Ordinance 1925, as amended by Ordinance No.
3364of the City of Manila, without protest, are refundable;(2) Assuming
arguendo, that plaintiff-appellee is entitled to the refund of the retail taxes in
question, whether or not the claim for refund filed in October 1956, in so far
as said claim refers to taxes paid from 1950 to 1952 has already
prescribed. .

Under the first issue, defendants-appellants contend tht the taxes in

question were voluntarily paid by appellee company and since, in this
jurisdiction, in order that a legal basis arise for claim of refund of taxes
erroneously assessed, payment thereof must be made under protest, and
this being a condition sine qua non, and no protest having been made, --
verbally or in writing, therebyindicating that the payment was voluntary, the
action must fail. Cited in support of the above contention, are the cases of
Zaragoza vs. Alfonso, 46 Phil. 160-161, and Gavino v. Municipality of
Calapan, 71 Phil. 438..

In refutation of the above stand of appellants, appellee avers tht the

payments could not have been voluntary.At most, they were paid
"mistakenly and in good faith"and "without protest in the erroneous belief
that it was liable thereof." Voluntariness is incompatible with protest and
mistake. It submits that this is a simple case of "solutio indebiti"..

Appellants do not dispute the fact that appellee-companyis exempted from

the payment of the tax in question.This is manifest from the reply of
appellant City Treasurer stating that sales of manufactured products at the
factory site are not taxable either under the Wholesalers Ordinance or
under the Retailers' Ordinance. With this admission, it would seem clear
that the taxes collected from appellee were paid, thru an error or mistake,
which places said act of payment within the pale of the new Civil Code
provision on solutio indebiti. The appellant City of Manila, at the very start,
notwithstanding the Ordinance imposing the Retailer's Tax, had no right to
demand payment thereof..

"If something is received when there is no right to demand it, and it was
unduly delivered through mistake, the obligationto retun it arises" (Art.
2154, NCC)..

Appelle categorically stated that the payment was not voluntarily made, (a
fact found also by the lower court),but on the erronoues belief, that they
were due. Under this circumstance, the amount paid, even without protest
is recoverable. "If the payer was in doubt whether the debt was due, he
may recover if he proves that it was not due" (Art. 2156, NCC). Appellee
had duly proved that taxes were not lawfully due. There is, therefore, no
doubt that the provisions of solutio indebtiti, the new Civil Code, apply to
the admitted facts of the case..

With all, appellant quoted Manresa as saying: "x x x De la misma opinion

son el Sr. Sanchez Roman y el Sr. Galcon, et cual afirma que si la paga se
hizo por error de derecho, ni existe el cuasi-contrato ni esta obligado a la
restitucion el que cobro, aunque no se debiera lo que se pago" (Manresa,
Tomo 12, paginas 611-612). This opinion, however, has already lost its
persuasiveness, in view of the provisions of the Civil Code, recognizing
"error de derecho" as a basis for the quasi-contract, of solutio indebiti. .

"Payment by reason of a mistake in the contruction or application of a

doubtful or difficult question of law may come within the scope of the
preceding article" (Art. 21555)..

There is no gainsaying the fact that the payments made by appellee was
due to a mistake in the construction of a doubtful question of law. The
reason underlying similar provisions, as applied to illegal taxation, in the
United States, is expressed in the case of Newport v. Ringo, 37 Ky. 635,
636; 10 S.W. 2, in the following manner:.
"It is too well settled in this state to need the citation of authority that if
money be paid through a clear mistake of law or fact, essentially affecting
the rights of the parties, and which in law or conscience was not payable,
and should not be retained by the party receiving it, it may be recovered.
Both law and sound morality so dictate. Especially should this be the rule
as to illegal taxation. The taxpayer has no voice in the impositionof the
burden. He has the right to presume that the taxing power has been
lawfully exercised. He should not be required to know more than those in
authority over him, nor should he suffer loss by complying with what he
bona fide believe to be his duty as a good citizen. Upon the contrary, he
should be promoted to its ready performance by refunding to him any legal
exaction paid by him in ignorance of its illegality; and, certainly, in such a
case, if be subject to a penalty for nonpayment, his compliance under belief
of its legality, and without awaitinga resort to judicial proceedings should
not be regrded in law as so far voluntary as to affect his right of recovery.".

"Every person who through an act or performance by another, or any other

means, acquires or comes into possession of something at the expense of
the latter without just or legal grounds, shall return the same to him"(Art. 22,
Civil Code). It would seems unedifying for the government, (here the City of
Manila), that knowing it has no right at all to collect or to receive money for
alleged taxes paid by mistake, it would be reluctant to return the same. No
one should enrich itself unjustly at the expense of another (Art. 2125, Civil
Code)..

Admittedly, plaintiff-appellee paid the tax without protest.Equally admitted is

the fact that section 76 of the Charter of Manila provides that "No court
shall entertain any suit assailing the validity of tax assessed under this
article until the taxpayer shall have paid, under protest the taxes assessed
against him, xx". It should be noted, however, that the article referred to in
said section is Article XXI, entitled Department of Assessment and the
sections thereunder manifestly show that said article and its sections relate
to asseessment, collection and recovery of real estate taxes only. Said
section 76, therefor, is not applicable to the case at bar, which relates to the
recover of retail dealer taxes..

In the opinion of the Secretary of Justice (Op. 90,Series of 1957, in a

question similar to the case at bar, it was held that the requiredment of
protest refers only to the payment of taxes which are directly imposed by
the charter itself, that is, real estate taxes, which view was sustained by
judicial and administrative precedents, one of which is the case of Medina,
et al., v. City of Baguio, G.R. No. L-4269, Aug. 29, 1952. In other words,
protest is not necessary for the recovery of retail dealer's taxes, like the
present, because they are not directly imposed by the charter. In the
Medina case, the Charter of Baguio (Chap. 61, Revised Adm. Code),
provides that "no court shall entertain any suit assailing the validity of a tax
assessed unde this charter until the tax-payer shall have paid, under
protest, the taxes assessed against him (sec.25474[b], Rev. Adm. Code), a
proviso similar to section 76 of the Manila Charter. The refund of specific
taxes paid under a void ordinance was ordered, although it did not appear
that payment thereof was made under protest..

In a recent case, We said: "The appellants argue that the sum the refund of
which is sought by the appellee, was not paid under protest and hence is
not refundable. Again, the trial court correctly held that being unauthorized,
it is not a tax assessed under the Charter of the Appellant City of Davao
and for that reason, no protest is necessary for a claim or demand for its
refund" (Citing the Medina case, supra; East Asiatic Co., Ltd. v. City of
Davao, G.R. No. L-16253, Aug. 21, 1962). Lastly, being a case of solutio
indebiti, protest is not required as a condition sine qua non for its
application..

The next issue in discussion is that of prescription. Appellants maintain that

article 1146 (NCC), which provides for a period of four (4) years (upon
injury to the rights of the plaintiff), apply to the case. On the other hand,
appellee contends that provisions of Act 190 (Code of Civ. Procedure)
should apply, insofar as payments made before the effectivity of the New
Civil Code on August 30, 1950, the period of which is ten (10) years, (Sec.
40,Act No. 190; Osorio v. Tan Jongko, 51 O.G. 6211) and article 1145
(NCC), for payments made after said effectivity, providing for a period of six
(6) years (upon quasi-contracts like solutio indebiti). Even if the
provisionsof Act No. 190 should apply to those payments made before the
effectivity of the new Civil Code, because "prescription already runnig
before the effectivity of this Code shall be governed by laws previously in
force x x x" (art. 1116, NCC), for payments made after said
effectivity,providing for a period of six (6) years (upon quasi-contracts like
solutio indebiti). Even if the provisions of Act No. 190should apply to those
payments made before the effectivity of the new Civil Code, because
"prescription already running before the effectivity of of this Code shall be
govern by laws previously in force xxx " (Art. 1116, NCC), Still payments
made before August 30, 1950 are no longer recoverable in view of the
second paragraph of said article (1116), which provides:"but if since the
time this Code took effect the entire period herein required for prescription
should elapse the present Code shall be applicable even though by the
former laws a longer period might be required". Anent the payments made
after August 30, 1950, it is abvious that the action has prescribed with
respect to those made before October 30, 1950 only, considering the fact
that the prescription of action is interrupted xxx when is a writteen extra-
judicial demand x x x" (Art. 1155, NCC), and the written demand in the case
at bar was made on October 30, 1956 (Stipulation of Facts).MODIFIED in
the sense that only payments made on or after October 30, 1950 should be
refunded, the decision appealed from is affirmed, in all other respects. No
costs. .

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion,Dizon, Regala and

Makalintal, JJ., concur.

Padilla, Reyes, J.B.L., and Barrera, JJ., too no part.

Decision affirmed.

—————————————————————————————————

Case 9. Saludaga vs FEU April 30, 2008

THIRD DIVISION

G.R. No. 179337 April 30, 2008

JOSEPH SALUDAGA, petitioner, 


vs.

FAR EASTERN UNIVERSITY and EDILBERTO C. DE JESUS in his
capacity as President of FEU, respondents.

DECISION

YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court
assails the June 29, 2007 Decision2 of the Court of Appeals in CA-G.R. CV
No. 87050, nullifying and setting aside the November 10, 2004 Decision3 of
the Regional Trial Court of Manila, Branch 2, in Civil Case No. 98-89483
and dismissing the complaint filed by petitioner; as well as its August 23,
2007 Resolution4 denying the Motion for Reconsideration.5

The antecedent facts are as follows:

Petitioner Joseph Saludaga was a sophomore law student of respondent

Far Eastern University (FEU) when he was shot by Alejandro Rosete
(Rosete), one of the security guards on duty at the school premises on
August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical
Foundation (FEU-NRMF) due to the wound he sustained.6Meanwhile,
Rosete was brought to the police station where he explained that the
shooting was accidental. He was eventually released considering that no
formal complaint was filed against him.

Petitioner thereafter filed a complaint for damages against respondents on

the ground that they breached their obligation to provide students with a
safe and secure environment and an atmosphere conducive to learning.
Respondents, in turn, filed a Third-Party Complaint7 against Galaxy
Development and Management Corporation (Galaxy), the agency
contracted by respondent FEU to provide security services within its
premises and Mariano D. Imperial (Imperial), Galaxy's President, to
indemnify them for whatever would be adjudged in favor of petitioner, if
any; and to pay attorney's fees and cost of the suit. On the other hand,
Galaxy and Imperial filed a Fourth-Party Complaint against AFP General
Insurance.8

On November 10, 2004, the trial court rendered a decision in favor of

petitioner, the dispositive portion of which reads:

WHEREFORE, from the foregoing, judgment is hereby rendered ordering:

1. FEU and Edilberto de Jesus, in his capacity as president of FEU to pay

jointly and severally Joseph Saludaga the amount of P35,298.25 for actual
damages with 12% interest per annum from the filing of the complaint until
fully paid; moral damages of P300,000.00, exemplary damages of
P500,000.00, attorney's fees of P100,000.00 and cost of the suit;

2. Galaxy Management and Development Corp. and its president, Col.

Mariano Imperial to indemnify jointly and severally 3rd party plaintiffs (FEU
and Edilberto de Jesus in his capacity as President of FEU) for the above-
mentioned amounts;

3. And the 4th party complaint is dismissed for lack of cause of action. No
pronouncement as to costs.

SO ORDERED.9

Respondents appealed to the Court of Appeals which rendered the

assailed Decision, the decretal portion of which provides, viz:

WHEREFORE, the appeal is hereby GRANTED. The Decision dated

November 10, 2004 is hereby REVERSED and SET ASIDE. The complaint
filed by Joseph Saludaga against appellant Far Eastern University and its
President in Civil Case No. 98-89483 is DISMISSED.

SO ORDERED.10

Petitioner filed a Motion for Reconsideration which was denied; hence, the
instant petition based on the following grounds:

THE COURT OF APPEALS SERIOUSLY ERRED IN MANNER

CONTRARY TO LAW AND JURISPRUDENCE IN RULING THAT:

5.1. THE SHOOTING INCIDENT IS A FORTUITOUS EVENT;

5.2. RESPONDENTS ARE NOT LIABLE FOR DAMAGES FOR THE

INJURY RESULTING FROM A GUNSHOT WOUND SUFFERED BY THE
PETITIONER FROM THE HANDS OF NO LESS THAN THEIR OWN
SECURITY GUARD IN VIOLATION OF THEIR BUILT-IN CONTRACTUAL
OBLIGATION TO PETITIONER, BEING THEIR LAW STUDENT AT THAT
TIME, TO PROVIDE HIM WITH A SAFE AND SECURE EDUCATIONAL
ENVIRONMENT;

5.3. SECURITY GAURD, ALEJANDRO ROSETE, WHO SHOT

PETITIONER WHILE HE WAS WALKING ON HIS WAY TO THE LAW
LIBRARY OF RESPONDENT FEU IS NOT THEIR EMPLOYEE BY
VIRTUE OF THE CONTRACT FOR SECURITY SERVICES BETWEEN
GALAXY AND FEU NOTWITHSTANDING THE FACT THAT PETITIONER,
NOT BEING A PARTY TO IT, IS NOT BOUND BY THE SAME UNDER THE
PRINCIPLE OF RELATIVITY OF CONTRACTS; and
5.4. RESPONDENT EXERCISED DUE DILIGENCE IN SELECTING
GALAXY AS THE AGENCY WHICH WOULD PROVIDE SECURITY
SERVICES WITHIN THE PREMISES OF RESPONDENT FEU.11

Petitioner is suing respondents for damages based on the alleged breach

of student-school contract for a safe learning environment. The pertinent
portions of petitioner's Complaint read:

6.0. At the time of plaintiff's confinement, the defendants or any of their

representative did not bother to visit and inquire about his condition. This
abject indifference on the part of the defendants continued even after
plaintiff was discharged from the hospital when not even a word of
consolation was heard from them. Plaintiff waited for more than one (1)
year for the defendants to perform their moral obligation but the wait was
fruitless. This indifference and total lack of concern of defendants served to
exacerbate plaintiff's miserable condition.

xxxx

11.0. Defendants are responsible for ensuring the safety of its students
while the latter are within the University premises. And that should anything
untoward happens to any of its students while they are within the
University's premises shall be the responsibility of the defendants. In this
case, defendants, despite being legally and morally bound, miserably failed
to protect plaintiff from injury and thereafter, to mitigate and compensate
plaintiff for said injury;

12.0. When plaintiff enrolled with defendant FEU, a contract was entered
into between them. Under this contract, defendants are supposed to ensure
that adequate steps are taken to provide an atmosphere conducive to study
and ensure the safety of the plaintiff while inside defendant FEU's
premises. In the instant case, the latter breached this contract when
defendant allowed harm to befall upon the plaintiff when he was shot at by,
of all people, their security guard who was tasked to maintain peace inside
the campus.12

In Philippine School of Business Administration v. Court of Appeals,13 we

held that:

When an academic institution accepts students for enrollment, there is

established a contract between them, resulting in bilateral obligations which
both parties are bound to comply with. For its part, the school undertakes to
provide the student with an education that would presumably suffice to
equip him with the necessary tools and skills to pursue higher education or
a profession. On the other hand, the student covenants to abide by the
school's academic requirements and observe its rules and regulations.

Institutions of learning must also meet the implicit or "built-in" obligation of

providing their students with an atmosphere that promotes or assists in
attaining its primary undertaking of imparting knowledge. Certainly, no
student can absorb the intricacies of physics or higher mathematics or
explore the realm of the arts and other sciences when bullets are flying or
grenades exploding in the air or where there looms around the school
premises a constant threat to life and limb. Necessarily, the school must
ensure that adequate steps are taken to maintain peace and order within
the campus premises and to prevent the breakdown thereof.14

It is undisputed that petitioner was enrolled as a sophomore law student in

respondent FEU. As such, there was created a contractual obligation
between the two parties. On petitioner's part, he was obliged to comply with
the rules and regulations of the school. On the other hand, respondent
FEU, as a learning institution is mandated to impart knowledge and equip
its students with the necessary skills to pursue higher education or a
profession. At the same time, it is obliged to ensure and take adequate
steps to maintain peace and order within the campus.

It is settled that in culpa contractual, the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a
corresponding right of relief.15 In the instant case, we find that, when
petitioner was shot inside the campus by no less the security guard who
was hired to maintain peace and secure the premises, there is a prima
facie showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.

In order to avoid liability, however, respondents aver that the shooting

incident was a fortuitous event because they could not have reasonably
foreseen nor avoided the accident caused by Rosete as he was not their
employee;16and that they complied with their obligation to ensure a safe
learning environment for their students by having exercised due diligence in
selecting the security services of Galaxy.
After a thorough review of the records, we find that respondents failed to
discharge the burden of proving that they exercised due diligence in
providing a safe learning environment for their students. They failed to
prove that they ensured that the guards assigned in the campus met the
requirements stipulated in the Security Service Agreement. Indeed, certain
documents about Galaxy were presented during trial; however, no evidence
as to the qualifications of Rosete as a security guard for the university was
offered.

Respondents also failed to show that they undertook steps to ascertain and
confirm that the security guards assigned to them actually possess the
qualifications required in the Security Service Agreement. It was not proven
that they examined the clearances, psychiatric test results, 201 files, and
other vital documents enumerated in its contract with Galaxy. Total reliance
on the security agency about these matters or failure to check the papers
stating the qualifications of the guards is negligence on the part of
respondents. A learning institution should not be allowed to completely
relinquish or abdicate security matters in its premises to the security
agency it hired. To do so would result to contracting away its inherent
obligation to ensure a safe learning environment for its students.

Consequently, respondents' defense of force majeure must fail. In order

for force majeure to be considered, respondents must show that no
negligence or misconduct was committed that may have occasioned the
loss. An act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss.
One's negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event would not
exempt one from liability. When the effect is found to be partly the result of
a person's participation - whether by active intervention, neglect or failure
to act - the whole occurrence is humanized and removed from the rules
applicable to acts of God.17

Article 1170 of the Civil Code provides that those who are negligent in the
performance of their obligations are liable for damages. Accordingly, for
breach of contract due to negligence in providing a safe learning
environment, respondent FEU is liable to petitioner for damages. It is
essential in the award of damages that the claimant must have
satisfactorily proven during the trial the existence of the factual basis of the
damages and its causal connection to defendant's acts.18

In the instant case, it was established that petitioner spent P35,298.25 for
his hospitalization and other medical expenses.19 While the trial court
correctly imposed interest on said amount, however, the case at bar
involves an obligation arising from a contract and not a loan or forbearance
of money. As such, the proper rate of legal interest is six percent (6%) per
annum of the amount demanded. Such interest shall continue to run from
the filing of the complaint until the finality of this Decision.20 After this
Decision becomes final and executory, the applicable rate shall be twelve
percent (12%) per annum until its satisfaction.

The other expenses being claimed by petitioner, such as transportation

expenses and those incurred in hiring a personal assistant while
recuperating were however not duly supported by receipts.21 In the
absence thereof, no actual damages may be awarded. Nonetheless,
temperate damages under Art. 2224 of the Civil Code may be recovered
where it has been shown that the claimant suffered some pecuniary loss
but the amount thereof cannot be proved with certainty. Hence, the amount
of P20,000.00 as temperate damages is awarded to petitioner.

As regards the award of moral damages, there is no hard and fast rule in
the determination of what would be a fair amount of moral damages since
each case must be governed by its own peculiar circumstances.22 The
testimony of petitioner about his physical suffering, mental anguish, fright,
serious anxiety, and moral shock resulting from the shooting
incident23 justify the award of moral damages. However, moral damages
are in the category of an award designed to compensate the claimant for
actual injury suffered and not to impose a penalty on the wrongdoer. The
award is not meant to enrich the complainant at the expense of the
defendant, but to enable the injured party to obtain means, diversion, or
amusements that will serve to obviate the moral suffering he has
undergone. It is aimed at the restoration, within the limits of the possible, of
the spiritual status quo ante, and should be proportionate to the suffering
inflicted. Trial courts must then guard against the award of exorbitant
damages; they should exercise balanced restrained and measured
objectivity to avoid suspicion that it was due to passion, prejudice, or
corruption on the part of the trial court.24 We deem it just and reasonable
under the circumstances to award petitioner moral damages in the amount
of P100,000.00.

Likewise, attorney's fees and litigation expenses in the amount of

P50,000.00 as part of damages is reasonable in view of Article 2208 of the
Civil Code.25 However, the award of exemplary damages is deleted
considering the absence of proof that respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.

We note that the trial court held respondent De Jesus solidarily liable with
respondent FEU. In Powton Conglomerate, Inc. v. Agcolicol,26 we held that:

[A] corporation is invested by law with a personality separate and distinct

from those of the persons composing it, such that, save for certain
exceptions, corporate officers who entered into contracts in behalf of the
corporation cannot be held personally liable for the liabilities of the latter.
Personal liability of a corporate director, trustee or officer along (although
not necessarily) with the corporation may so validly attach, as a rule, only
when - (1) he assents to a patently unlawful act of the corporation, or when
he is guilty of bad faith or gross negligence in directing its affairs, or when
there is a conflict of interest resulting in damages to the corporation, its
stockholders or other persons; (2) he consents to the issuance of watered
down stocks or who, having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto; (3) he agrees to hold
himself personally and solidarily liable with the corporation; or (4) he is
made by a specific provision of law personally answerable for his corporate
action.27

None of the foregoing exceptions was established in the instant case;

hence, respondent De Jesus should not be held solidarily liable with
respondent FEU.

Incidentally, although the main cause of action in the instant case is the
breach of the school-student contract, petitioner, in the alternative, also
holds respondents vicariously liable under Article 2180 of the Civil Code,
which provides:

Art. 2180. The obligation imposed by Article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for whom
one is responsible.
xxxx

Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.

xxxx

The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good
father of a family to prevent damage.

We agree with the findings of the Court of Appeals that respondents cannot
be held liable for damages under Art. 2180 of the Civil Code because
respondents are not the employers of Rosete. The latter was employed by
Galaxy. The instructions issued by respondents' Security Consultant to
Galaxy and its security guards are ordinarily no more than requests
commonly envisaged in the contract for services entered into by a principal
and a security agency. They cannot be construed as the element of control
as to treat respondents as the employers of Rosete.28

As held in Mercury Drug Corporation v. Libunao:29

In Soliman, Jr. v. Tuazon,30 we held that where the security agency recruits,
hires and assigns the works of its watchmen or security guards to a client,
the employer of such guards or watchmen is such agency, and not the
client, since the latter has no hand in selecting the security guards. Thus,
the duty to observe the diligence of a good father of a family cannot be
demanded from the said client:

… [I]t is settled in our jurisdiction that where the security agency, as here,
recruits, hires and assigns the work of its watchmen or security guards, the
agency is the employer of such guards or watchmen. Liability for illegal or
harmful acts committed by the security guards attaches to the employer
agency, and not to the clients or customers of such agency. As a general
rule, a client or customer of a security agency has no hand in selecting who
among the pool of security guards or watchmen employed by the agency
shall be assigned to it; the duty to observe the diligence of a good father of
a family in the selection of the guards cannot, in the ordinary course of
events, be demanded from the client whose premises or property are
protected by the security guards.
xxxx

The fact that a client company may give instructions or directions to the
security guards assigned to it, does not, by itself, render the client
responsible as an employer of the security guards concerned and liable for
their wrongful acts or omissions.31

We now come to respondents' Third Party Claim against Galaxy.

In Firestone Tire and Rubber Company of the Philippines v. Tempengko,
32 we held that:

The third-party complaint is, therefore, a procedural device whereby a 'third

party' who is neither a party nor privy to the act or deed complained of by
the plaintiff, may be brought into the case with leave of court, by the
defendant, who acts as third-party plaintiff to enforce against such third-
party defendant a right for contribution, indemnity, subrogation or any other
relief, in respect of the plaintiff's claim. The third-party complaint is actually
independent of and separate and distinct from the plaintiff's complaint.
Were it not for this provision of the Rules of Court, it would have to be filed
independently and separately from the original complaint by the defendant
against the third-party. But the Rules permit defendant to bring in a third-
party defendant or so to speak, to litigate his separate cause of action in
respect of plaintiff's claim against a third-party in the original and principal
case with the object of avoiding circuitry of action and unnecessary
proliferation of law suits and of disposing expeditiously in one litigation the
entire subject matter arising from one particular set of facts.33

Respondents and Galaxy were able to litigate their respective claims and
defenses in the course of the trial of petitioner's complaint. Evidence duly
supports the findings of the trial court that Galaxy is negligent not only in
the selection of its employees but also in their supervision. Indeed, no
administrative sanction was imposed against Rosete despite the shooting
incident; moreover, he was even allowed to go on leave of absence which
led eventually to his disappearance.34 Galaxy also failed to monitor
petitioner's condition or extend the necessary assistance, other than the
P5,000.00 initially given to petitioner. Galaxy and Imperial failed to make
good their pledge to reimburse petitioner's medical expenses.

For these acts of negligence and for having supplied respondent FEU with
an unqualified security guard, which resulted to the latter's breach of
obligation to petitioner, it is proper to hold Galaxy liable to respondent FEU
for such damages equivalent to the above-mentioned amounts awarded to
petitioner.

Unlike respondent De Jesus, we deem Imperial to be solidarily liable with

Galaxy for being grossly negligent in directing the affairs of the security
agency. It was Imperial who assured petitioner that his medical expenses
will be shouldered by Galaxy but said representations were not fulfilled
because they presumed that petitioner and his family were no longer
interested in filing a formal complaint against them.35

WHEREFORE, the petition is GRANTED. The June 29, 2007 Decision of

the Court of Appeals in CA-G.R. CV No. 87050 nullifying the Decision of
the trial court and dismissing the complaint as well as the August 23, 2007
Resolution denying the Motion for Reconsideration are REVERSED and
SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 2,
in Civil Case No. 98-89483 finding respondent FEU liable for damages for
breach of its obligation to provide students with a safe and secure learning
atmosphere, is AFFIRMED with the following MODIFICATIONS:

a. respondent Far Eastern University (FEU) is ORDERED to pay petitioner

actual damages in the amount of P35,298.25, plus 6% interest per annum
from the filing of the complaint until the finality of this Decision. After this
decision becomes final and executory, the applicable rate shall be twelve
percent (12%) per annum until its satisfaction;

b. respondent FEU is also ORDERED to pay petitioner temperate damages

in the amount of P20,000.00; moral damages in the amount of
P100,000.00; and attorney's fees and litigation expenses in the amount of
P50,000.00;

c. the award of exemplary damages is DELETED.

The Complaint against respondent Edilberto C. De Jesus is DISMISSED.

The counterclaims of respondents are likewise DISMISSED.

Galaxy Development and Management Corporation (Galaxy) and its

president, Mariano D. Imperial are ORDEREDto jointly and severally pay
respondent FEU damages equivalent to the above-mentioned amounts
awarded to petitioner.

SO ORDERED.
—————————————————————————————————

Case 10. Sagrada Orden vs NACOCO 91 Phil 503

G.R. No. L-3756 June 30, 1952

SAGRADA ORDEN DE PREDICADORES DEL SANTISMO ROSARIO DE

FILIPINAS, plaintiff-appellee, 

vs.

NATIONAL COCONUT CORPORATION, defendant-appellant.

First Assistant Corporate Counsel Federico C. Alikpala and Assistant

Attorney Augusto Kalaw for appellant.

Ramirez and Ortigas for appellee.

LABRADOR, J.:

This is an action to recover the possession of a piece of real property (land

and warehouses) situated in Pandacan Manila, and the rentals for its
occupation and use. The land belongs to the plaintiff, in whose name the
title was registered before the war. On January 4, 1943, during the
Japanese military occupation, the land was acquired by a Japanese
corporation by the name of Taiwan Tekkosho for the sum of P140,00, and
thereupon title thereto issued in its name (transfer certificate of title No.
64330, Register of Deeds, Manila). After liberation, more specifically on
April 4, 1946, the Alien Property Custodian of the United States of America
took possession, control, and custody thereof under section 12 of the
Trading with the Enemy Act, 40 Stat., 411, for the reason that it belonged to
an enemy national. During the year 1946 the property was occupied by the
Copra Export Management Company under a custodianship agreement
with United States Alien Property Custodian (Exhibit G), and when it
vacated the property it was occupied by the defendant herein. The
Philippine Government made representations with the Office Alien Property
Custodian for the use of property by the Government (see Exhibits 2, 2-A,
2-B, and 1). On March 31, 1947, the defendant was authorized to repair the
warehouse on the land, and actually spent thereon the repairs the sum of
P26,898.27. In 1948, defendant leased one-third of the warehouse to one
Dioscoro Sarile at a monthly rental of P500, which was later raised to
P1,000 a month. Sarile did not pay the rents, so action was brought against
him. It is not shown, however, if the judgment was ever executed.
Plaintiff made claim to the property before the Alien Property Custodian of
the United States, but as this was denied, it brought an action in court
(Court of First Instance of Manila, civil case No. 5007, entitled "La Sagrada
Orden Predicadores de la Provinicia del Santisimo Rosario de Filipinas,"
vs. Philippine Alien Property Administrator, defendant, Republic of the
Philippines, intervenor) to annul the sale of property of Taiwan Tekkosho,
and recover its possession. The Republic of the Philippines was allowed to
intervene in the action. The case did not come for trial because the parties
presented a joint petition in which it is claimed by plaintiff that the sale in
favor of the Taiwan Tekkosho was null and void because it was executed
under threats, duress, and intimidation, and it was agreed that the title
issued in the name of the Taiwan Tekkosho be cancelled and the original
title of plaintiff re-issued; that the claims, rights, title, and interest of the
Alien Property Custodian be cancelled and held for naught; that the
occupant National Coconut Corporation has until February 28, 1949, to
recover its equipment from the property and vacate the premises; that
plaintiff, upon entry of judgment, pay to the Philippine Alien Property
Administration the sum of P140,000; and that the Philippine Alien Property
Administration be free from responsibility or liability for any act of the
National Coconut Corporation, etc. Pursuant to the agreement the court
rendered judgment releasing the defendant and the intervenor from liability,
but reversing to the plaintiff the right to recover from the National Coconut
Corporation reasonable rentals for the use and occupation of the premises.
(Exhibit A-1.)

The present action is to recover the reasonable rentals from August, 1946,
the date when the defendant began to occupy the premises, to the date it
vacated it. The defendant does not contest its liability for the rentals at the
rate of P3,000 per month from February 28, 1949 (the date specified in the
judgment in civil case No. 5007), but resists the claim therefor prior to this
date. It interposes the defense that it occupied the property in good faith,
under no obligation whatsoever to pay rentals for the use and occupation of
the warehouse. Judgment was rendered for the plaintiff to recover from the
defendant the sum of P3,000 a month, as reasonable rentals, from August,
1946, to the date the defendant vacates the premises. The judgment
declares that plaintiff has always been the owner, as the sale of Japanese
purchaser was void ab initio; that the Alien Property Administration never
acquired any right to the property, but that it held the same in trust until the
determination as to whether or not the owner is an enemy citizen. The trial
court further declares that defendant can not claim any better rights than its
predecessor, the Alien Property Administration, and that as defendant has
used the property and had subleased portion thereof, it must pay
reasonable rentals for its occupation.

Against this judgment this appeal has been interposed, the following
assignment of error having been made on defendant-appellant's behalf:

The trial court erred in holding the defendant liable for rentals or
compensation for the use and occupation of the property from the middle of
August, 1946, to December 14, 1948.

1. Want to "ownership rights" of the Philippine Alien Property Administration

did not render illegal or invalidate its grant to the defendant of the free use
of property.

2. the decision of the Court of First Instance of Manila declaring the sale by
the plaintiff to the Japanese purchaser null and void ab initio and that the
plaintiff was and has remained as the legal owner of the property, without
legal interruption, is not conclusive.

3. Reservation to the plaintiff of the right to recover from the defendant

corporation not binding on the later;

4. Use of the property for commercial purposes in itself alone does not
justify payment of rentals.

5. Defendant's possession was in good faith.

6. Defendant's possession in the nature of usufruct.

In reply, plaintiff-appellee's counsel contends that the Philippine Allien

Property Administration (PAPA) was a mere administrator of the owner
(who ultimately was decided to be plaintiff), and that as defendant has used
it for commercial purposes and has leased portion of it, it should be
responsible therefore to the owner, who had been deprived of the
possession for so many years. (Appellee's brief, pp. 20, 23.)

We can not understand how the trial court, from the mere fact that plaintiff-
appellee was the owner of the property and the defendant-appellant the
occupant, which used for its own benefit but by the express permission of
the Alien Property Custodian of the United States, so easily jumped to the
conclusion that the occupant is liable for the value of such use and
occupation. If defendant-appellant is liable at all, its obligations, must arise
from any of the four sources of obligations, namley, law, contract or quasi-
contract, crime, or negligence. (Article 1089, Spanish Civil Code.)
Defendant-appellant is not guilty of any offense at all, because it entered
the premises and occupied it with the permission of the entity which had
the legal control and administration thereof, the Allien Property
Administration. Neither was there any negligence on its part. There was
also no privity (of contract or obligation) between the Alien Property
Custodian and the Taiwan Tekkosho, which had secured the possession of
the property from the plaintiff-appellee by the use of duress, such that the
Alien Property Custodian or its permittee (defendant-appellant) may be
held responsible for the supposed illegality of the occupation of the
property by the said Taiwan Tekkosho. The Allien Property Administration
had the control and administration of the property not as successor to the
interests of the enemy holder of the title, the Taiwan Tekkosho, but by
express provision of law (Trading with the Enemy Act of the United States,
40 Stat., 411; 50 U.S.C.A., 189). Neither is it a trustee of the former owner,
the plaintiff-appellee herein, but a trustee of then Government of the United
States (32 Op. Atty. Gen. 249; 50 U.S.C.A. 283), in its own right, to the
exclusion of, and against the claim or title of, the enemy owner.
(Youghioheny & Ohio Coal Co. vs. Lasevich [1920], 179 N.W., 355; 171
Wis., 347; U.S.C.A., 282-283.) From August, 1946, when defendant-
appellant took possession, to the late of judgment on February 28, 1948,
Allien Property Administration had the absolute control of the property as
trustee of the Government of the United States, with power to dispose of it
by sale or otherwise, as though it were the absolute owner. (U.S vs.
Chemical Foundation [C.C.A. Del. 1925], 5 F. [2d], 191; 50 U.S.C.A., 283.)
Therefore, even if defendant-appellant were liable to the Allien Property
Administration for rentals, these would not accrue to the benefit of the
plaintiff-appellee, the owner, but to the United States Government.

But there is another ground why the claim or rentals can not be made
against defendant-appellant. There was no agreement between the Alien
Property Custodian and the defendant-appellant for the latter to pay rentals
on the property. The existence of an implied agreement to that effect is
contrary to the circumstances. The copra Export Management Company,
which preceded the defendant-appellant, in the possession and use of the
property, does not appear to have paid rentals therefor, as it occupied it by
what the parties denominated a "custodianship agreement," and there is no
provision therein for the payment of rentals or of any compensation for its
custody and or occupation and the use. The Trading with the Enemy Act,
as originally enacted, was purely a measure of conversation, hence, it is
very unlikely that rentals were demanded for the use of the property. When
the National coconut Corporation succeeded the Copra Export
Management Company in the possession and use of the property, it must
have been also free from payment of rentals, especially as it was
Government corporation, and steps where then being taken by the
Philippine Government to secure the property for the National Coconut
Corporation. So that the circumstances do not justify the finding that there
was an implied agreement that the defendant-appellant was to pay for the
use and occupation of the premises at all.

The above considerations show that plaintiff-appellee's claim for rentals

before it obtained the judgment annulling the sale of the Taiwan Tekkosho
may not be predicated on any negligence or offense of the defendant-
appellant, or any contract, express or implied, because the Allien Property
Administration was neither a trustee of plaintiff-appellee, nor a privy to the
obligations of the Taiwan Tekkosho, its title being based by legal provision
of the seizure of enemy property. We have also tried in vain to find a law or
provision thereof, or any principle in quasi contracts or equity, upon which
the claim can be supported. On the contrary, as defendant-appellant
entered into possession without any expectation of liability for such use and
occupation, it is only fair and just that it may not be held liable therefor. And
as to the rents it collected from its lessee, the same should accrue to it as a
possessor in good faith, as this Court has already expressly held.
(Resolution, National Coconut Corporation vs. Geronimo, 83 Phil. 467.)

Lastly, the reservation of this action may not be considered as vesting a

new right; if no right to claim for rentals existed at the time of the
reservation, no rights can arise or accrue from such reservation alone.

Wherefore, the part of the judgment appealed from, which sentences

defendant-appellant to pay rentals from August, 1946, to February 28,
1949, is hereby reversed. In all other respects the judgment is affirmed.
Costs of this appeal shall be against the plaintiff-appellee.

Paras, C.J., Pablo, Bengzon, Padilla, Tuason, Montemayor, and Bautista

Angelo, JJ, concur.
—————————————————————————————————

Case 11. People’s Car vs Commando Security 51 SCRA 40

EN BANC

G.R. No. L-36840 May 22, 1973

PEOPLE'S CAR INC., plaintiff-appellant, 


vs.

COMMANDO SECURITY SERVICE AGENCY, defendant-appellee.

TEEHANKEE, J.:

In this appeal from the adverse judgment of the Davao court of first
instance limiting plaintiff-appellant's recovery under its complaint to the sum
of P1,000.00 instead of the actual damages of P8,489.10 claimed and
suffered by it as a direct result of the wrongful acts of defendant security
agency's guard assigned at plaintiff's premises in pursuance of their "Guard
Service Contract", the Court finds merit in the appeal and accordingly
reverses the trial court's judgment.

The appeal was certified to this Court by a special division of the Court of
Appeals on a four-to-one vote as per its resolution of April 14, 1973 that
"Since the case was submitted to the court a quo for decision on the
strength of the stipulation of facts, only questions of law can be involved in
the present appeal."

The Court has accepted such certification and docketed this appeal on the
strength of its own finding from the records that plaintiff's notice of appeal
was expressly to this Court (not to the appellate court)" on pure questions
of law"1 and its record on appeal accordingly prayed that" the
corresponding records be certified and forwarded to the Honorable
Supreme Court."2 The trial court so approved the same3 on July 3, 1971
instead of having required the filing of a petition for review of the judgment
sought to be appealed from directly with this Court, in accordance with the
provisions of Republic Act 5440. By some unexplained and hitherto
undiscovered error of the clerk of court, furthermore, the record on appeal
was erroneously forwarded to the appellate court rather than to this Court.
The parties submitted the case for judgment on a stipulation of facts. There
is thus no dispute as to the factual bases of plaintiff's complaint for recovery
of actual damages against defendant, to wit, that under the subsisting
"Guard Service Contract" between the parties, defendant-appellee as a
duly licensed security service agency undertook in consideration of the
payments made by plaintiff to safeguard and protect the business premises
of (plaintiff) from theft, pilferage, robbery, vandalism and all other unlawful
acts of any person or person prejudicial to the interest of (plaintiff)."4

On April 5, 1970 at around 1:00 A.M., however, defendant's security guard

on duty at plaintiff's premises, "without any authority, consent, approval,
knowledge or orders of the plaintiff and/or defendant brought out of the
compound of the plaintiff a car belonging to its customer, and drove said
car for a place or places unknown, abandoning his post as such security
guard on duty inside the plaintiff's compound, and while so driving said car
in one of the City streets lost control of said car, causing the same to fall
into a ditch along J.P. Laurel St., Davao City by reason of which the
plaintiff's complaint for qualified theft against said driver, was blottered in
the office of the Davao City Police Department."5

As a result of these wrongful acts of defendant's security guard, the car of

plaintiff's customer, Joseph Luy, which had been left with plaintiff for
servicing and maintenance, "suffered extensive damage in the total amount
of P7,079."6 besides the car rental value "chargeable to defendant" in the
sum of P1,410.00 for a car that plaintiff had to rent and make available to
its said customer to enable him to pursue his business and occupation for
the period of forty-seven (47) days (from April 25 to June 10, 1970) that it
took plaintiff to repair the damaged car,7 or total actual damages incurred by
plaintiff in the sum of P8,489.10.

Plaintiff claimed that defendant was liable for the entire amount under
paragraph 5 of their contract whereunder defendant assumed "sole
responsibility for the acts done during their watch hours" by its guards,
whereas defendant contended, without questioning the amount of the
actual damages incurred by plaintiff, that its liability "shall not exceed one
thousand (P1,000.00) pesos per guard post" under paragraph 4 of their
contract.

The parties thus likewise stipulated on this sole issue submitted by them for
adjudication, as follows:
Interpretation of the contract, as to the extent of the liability of the
defendant to the plaintiff by reason of the acts of the employees of the
defendant is the only issue to be resolved.

The defendant relies on Par. 4 of the contract to support its contention

while the plaintiff relies on Par. 5 of the same contract in support of its
claims against the defendant. For ready reference they are quoted
hereunder:

'Par. 4. — Party of the Second Part (defendant) through the negligence of

its guards, after an investigation has been conducted by the Party of the
First Part (plaintiff) wherein the Party of the Second Part has been duly
represented shall assume full responsibilities for any loss or damages that
may occur to any property of the Party of the First Part for which it is
accountable, during the watch hours of the Party of the Second Part,
provided the same is reported to the Party of the Second Part within
twenty-four (24) hours of the occurrence, except where such loss or
damage is due to force majeure, provided however that after the proper
investigation to be made thereof that the guard on post is found negligent
and that the amount of the loss shall not exceed ONE THOUSAND
(P1,000.00) PESOS per guard post.'

'Par. 5 — The party of the Second Part assumes the responsibility for the
proper performance by the guards employed, of their duties and (shall) be
solely responsible for the acts done during their watch hours, the Party of
the First Part being specifically released from any and all liabilities to the
former's employee or to the third parties arising from the acts or omissions
done by the guard during their tour of 

duty.' ...8

The trial court, misreading the above-quoted contractual provisions, held

that "the liability of the defendant in favor of the plaintiff falls under
paragraph 4 of the Guard Service Contract" and rendered judgment
"finding the defendant liable to the plaintiff in the amount of P1,000.00 with
costs."

Hence, this appeal, which, as already indicated, is meritorious and must be

granted.

Paragraph 4 of the contract, which limits defendant's liability for the amount
of loss or damage to any property of plaintiff to "P1,000.00 per guard post,"
is by its own terms applicable only for loss or damage 'through
the negligenceof its guards ... during the watch hours" provided that the
same is duly reported by plaintiff within 24 hours of the occurrence and the
guard's negligence is verified after proper investigation with the attendance
of both contracting parties. Said paragraph is manifestly inapplicable to the
stipulated facts of record, which involve neither property of plaintiff that has
been lost or damaged at its premises nor mere negligence of defendant's
security guard on duty.

Here, instead of defendant, through its assigned security guards, complying

with its contractual undertaking 'to safeguard and protect the business
premises of (plaintiff) from theft, robbery, vandalism and all other unlawful
acts of any person or persons," defendant's own guard on duty unlawfully
and wrongfully drove out of plaintiffs premises a customer's car, lost control
of it on the highway causing it to fall into a ditch, thereby directly causing
plaintiff to incur actual damages in the total amount of P8,489.10.

Defendant is therefore undoubtedly liable to indemnify plaintiff for the entire

damages thus incurred, since under paragraph 5 of their contract it
"assumed the responsibility for the proper performance by the guards
employed of their duties and (contracted to) be solely responsible for the
acts done during their watch hours" and "specifically released (plaintiff)
from any and all liabilities ... to the third parties arising from the acts or
omissions done by the guards during their tour of duty." As plaintiff had duly
discharged its liability to the third party, its customer, Joseph Luy, for the
undisputed damages of P8,489.10 caused said customer, due to the
wanton and unlawful act of defendant's guard, defendant in turn was clearly
liable under the terms of paragraph 5 of their contract to indemnify plaintiff
in the same amount.

The trial court's approach that "had plaintiff understood the liability of the
defendant to fall under paragraph 5, it should have told Joseph Luy, owner
of the car, that under the Guard Service Contract, it was not liable for the
damage but the defendant and had Luy insisted on the liability of the
plaintiff, the latter should have challenged him to bring the matter to court. If
Luy accepted the challenge and instituted an action against the plaintiff, it
should have filed a third-party complaint against the Commando Security
Service Agency. But if Luy instituted the action against the plaintiff and the
defendant, the plaintiff should have filed a crossclaim against the
latter,"9 was unduly technical and unrealistic and untenable.
Plaintiff was in law liable to its customer for the damages caused the
customer's car, which had been entrusted into its custody. Plaintiff therefore
was in law justified in making good such damages and relying in turn on
defendant to honor its contract and indemnify it for such undisputed
damages, which had been caused directly by the unlawful and wrongful
acts of defendant's security guard in breach of their contract. As ordained in
Article 1159, Civil Code, "obligations arising from contracts have the force
of law between the contracting parties and should be complied with in good
faith."

Plaintiff in law could not tell its customer, as per the trial court's view, that
"under the Guard Service Contract it was not liable for the damage but the
defendant" — since the customer could not hold defendant to account for
the damages as he had no privity of contract with defendant. Such an
approach of telling the adverse party to go to court, notwithstanding his
plainly valid claim, aside from its ethical deficiency among others, could
hardly create any goodwill for plaintiff's business, in the same way that
defendant's baseless attempt to evade fully discharging its contractual
liability to plaintiff cannot be expected to have brought it more business.
Worse, the administration of justice is prejudiced, since the court dockets
are unduly burdened with unnecessary litigation.

ACCORDINGLY, the judgment appealed from is hereby reversed and

judgment is hereby rendered sentencing defendant-appellee to pay
plaintiff-appellant the sum of P8,489.10 as and by way of reimbursement of
the stipulated actual damages and expenses, as well as the costs of suit in
both instances. It is so ordered.

Makalintal, Zaldivar, Castro, Fernando, Barredo, Makasiar, Antonio and

Esguerra, JJ., concur.

—————————————————————————————————

Case 12. Cangco vs MRR 38 Phil 768

EN BANC
G.R. No. L-12191 October 14, 1918

JOSE CANGCO, plaintiff-appellant, 


vs.

MANILA RAILROAD CO., defendant-appellee.

Ramon Sotelo for appellant.


Kincaid & Hartigan for appellee.

FISHER, J.:

At the time of the occurrence which gave rise to this litigation the plaintiff,
Jose Cangco, was in the employment of Manila Railroad Company in the
capacity of clerk, with a monthly wage of P25. He lived in the pueblo of San
Mateo, in the province of Rizal, which is located upon the line of the
defendant railroad company; and in coming daily by train to the company's
office in the city of Manila where he worked, he used a pass, supplied by
the company, which entitled him to ride upon the company's trains free of
charge. Upon the occasion in question, January 20, 1915, the plaintiff
arose from his seat in the second class-car where he was riding and,
making, his exit through the door, took his position upon the steps of the
coach, seizing the upright guardrail with his right hand for support.

On the side of the train where passengers alight at the San Mateo station
there is a cement platform which begins to rise with a moderate gradient
some distance away from the company's office and extends along in front
of said office for a distance sufficient to cover the length of several
coaches. As the train slowed down another passenger, named Emilio
Zuñiga, also an employee of the railroad company, got off the same car,
alighting safely at the point where the platform begins to rise from the level
of the ground. When the train had proceeded a little farther the plaintiff
Jose Cangco stepped off also, but one or both of his feet came in contact
with a sack of watermelons with the result that his feet slipped from under
him and he fell violently on the platform. His body at once rolled from the
platform and was drawn under the moving car, where his right arm was
badly crushed and lacerated. It appears that after the plaintiff alighted from
the train the car moved forward possibly six meters before it came to a full
stop.
The accident occurred between 7 and 8 o'clock on a dark night, and as the
railroad station was lighted dimly by a single light located some distance
away, objects on the platform where the accident occurred were difficult to
discern especially to a person emerging from a lighted car.

The explanation of the presence of a sack of melons on the platform where

the plaintiff alighted is found in the fact that it was the customary season for
harvesting these melons and a large lot had been brought to the station for
the shipment to the market. They were contained in numerous sacks which
has been piled on the platform in a row one upon another. The testimony
shows that this row of sacks was so placed of melons and the edge of
platform; and it is clear that the fall of the plaintiff was due to the fact that
his foot alighted upon one of these melons at the moment he stepped upon
the platform. His statement that he failed to see these objects in the
darkness is readily to be credited.

The plaintiff was drawn from under the car in an unconscious condition,
and it appeared that the injuries which he had received were very serious.
He was therefore brought at once to a certain hospital in the city of Manila
where an examination was made and his arm was amputated. The result of
this operation was unsatisfactory, and the plaintiff was then carried to
another hospital where a second operation was performed and the member
was again amputated higher up near the shoulder. It appears in evidence
that the plaintiff expended the sum of P790.25 in the form of medical and
surgical fees and for other expenses in connection with the process of his
curation.

Upon August 31, 1915, he instituted this proceeding in the Court of First
Instance of the city of Manila to recover damages of the defendant
company, founding his action upon the negligence of the servants and
employees of the defendant in placing the sacks of melons upon the
platform and leaving them so placed as to be a menace to the security of
passenger alighting from the company's trains. At the hearing in the Court
of First Instance, his Honor, the trial judge, found the facts substantially as
above stated, and drew therefrom his conclusion to the effect that, although
negligence was attributable to the defendant by reason of the fact that the
sacks of melons were so placed as to obstruct passengers passing to and
from the cars, nevertheless, the plaintiff himself had failed to use due
caution in alighting from the coach and was therefore precluded form
recovering. Judgment was accordingly entered in favor of the defendant
company, and the plaintiff appealed.

It can not be doubted that the employees of the railroad company were
guilty of negligence in piling these sacks on the platform in the manner
above stated; that their presence caused the plaintiff to fall as he alighted
from the train; and that they therefore constituted an effective legal cause
of the injuries sustained by the plaintiff. It necessarily follows that the
defendant company is liable for the damage thereby occasioned unless
recovery is barred by the plaintiff's own contributory negligence. In
resolving this problem it is necessary that each of these conceptions of
liability, to-wit, the primary responsibility of the defendant company and the
contributory negligence of the plaintiff should be separately examined.

It is important to note that the foundation of the legal liability of the

defendant is the contract of carriage, and that the obligation to respond for
the damage which plaintiff has suffered arises, if at all, from the breach of
that contract by reason of the failure of defendant to exercise due care in its
performance. That is to say, its liability is direct and immediate, differing
essentially, in legal viewpoint from that presumptive responsibility for the
negligence of its servants, imposed by article 1903 of the Civil Code, which
can be rebutted by proof of the exercise of due care in their selection and
supervision. Article 1903 of the Civil Code is not applicable to obligations
arising ex contractu, but only to extra-contractual obligations — or to use
the technical form of expression, that article relates only to culpa aquiliana
and not to culpa contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of
the Civil Code, clearly points out this distinction, which was also recognized
by this Court in its decision in the case of Rakes vs. Atlantic, Gulf and
Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa
clearly points out the difference between "culpa, substantive and
independent, which of itself constitutes the source of an obligation between
persons not formerly connected by any legal tie" and culpa considered as
an accident in the performance of an obligation already existing . . . ."

In the Rakes case (supra) the decision of this court was made to rest
squarely upon the proposition that article 1903 of the Civil Code is not
applicable to acts of negligence which constitute the breach of a contract.

Upon this point the Court said:

The acts to which these articles [1902 and 1903 of the Civil Code] are
applicable are understood to be those not growing out of pre-existing duties
of the parties to one another. But where relations already formed give rise
to duties, whether springing from contract or quasi-contract, then breaches
of those duties are subject to article 1101, 1103, and 1104 of the same
code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)

This distinction is of the utmost importance. The liability, which, under the
Spanish law, is, in certain cases imposed upon employers with respect to
damages occasioned by the negligence of their employees to persons to
whom they are not bound by contract, is not based, as in the English
Common Law, upon the principle of respondeat superior — if it were, the
master would be liable in every case and unconditionally — but upon the
principle announced in article 1902 of the Civil Code, which imposes upon
all persons who by their fault or negligence, do injury to another, the
obligation of making good the damage caused. One who places a powerful
automobile in the hands of a servant whom he knows to be ignorant of the
method of managing such a vehicle, is himself guilty of an act of negligence
which makes him liable for all the consequences of his imprudence. The
obligation to make good the damage arises at the very instant that the
unskillful servant, while acting within the scope of his employment causes
the injury. The liability of the master is personal and direct. But, if the
master has not been guilty of any negligence whatever in the selection and
direction of the servant, he is not liable for the acts of the latter, whatever
done within the scope of his employment or not, if the damage done by the
servant does not amount to a breach of the contract between the master
and the person injured.

It is not accurate to say that proof of diligence and care in the selection and
control of the servant relieves the master from liability for the latter's acts —
on the contrary, that proof shows that the responsibility has never existed.
As Manresa says (vol. 8, p. 68) the liability arising from extra-
contractual culpa is always based upon a voluntary act or omission which,
without willful intent, but by mere negligence or inattention, has caused
damage to another. A master who exercises all possible care in the
selection of his servant, taking into consideration the qualifications they
should possess for the discharge of the duties which it is his purpose to
confide to them, and directs them with equal diligence, thereby performs
his duty to third persons to whom he is bound by no contractual ties, and
he incurs no liability whatever if, by reason of the negligence of his
servants, even within the scope of their employment, such third person
suffer damage. True it is that under article 1903 of the Civil Code the law
creates a presumption that he has been negligent in the selection or
direction of his servant, but the presumption is rebuttable and yield to proof
of due care and diligence in this respect.

The supreme court of Porto Rico, in interpreting identical provisions, as

found in the Porto Rico Code, has held that these articles are applicable to
cases of extra-contractual culpa exclusively. (Carmona vs. Cuesta, 20
Porto Rico Reports, 215.)

This distinction was again made patent by this Court in its decision in the
case of Bahia vs. Litonjua and Leynes, (30 Phil. rep., 624), which was an
action brought upon the theory of the extra-contractual liability of the
defendant to respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment. The Court, after
citing the last paragraph of article 1903 of the Civil Code, said:

From this article two things are apparent: (1) That when an injury is caused
by the negligence of a servant or employee there instantly arises a
presumption of law that there was negligence on the part of the master or
employer either in selection of the servant or employee, or in supervision
over him after the selection, or both; and (2) that that presumption is juris
tantum and not juris et de jure, and consequently, may be rebutted. It
follows necessarily that if the employer shows to the satisfaction of the
court that in selection and supervision he has exercised the care and
diligence of a good father of a family, the presumption is overcome and he
is relieved from liability.

This theory bases the responsibility of the master ultimately on

his own negligence and not on that of his servant. This is the notable
peculiarity of the Spanish law of negligence. It is, of course, in striking
contrast to the American doctrine that, in relations with strangers, the
negligence of the servant in conclusively the negligence of the master.

The opinion there expressed by this Court, to the effect that in case of
extra-contractual culpa based upon negligence, it is necessary that there
shall have been some fault attributable to the defendant personally, and
that the last paragraph of article 1903 merely establishes a rebuttable
presumption, is in complete accord with the authoritative opinion of
Manresa, who says (vol. 12, p. 611) that the liability created by article 1903
is imposed by reason of the breach of the duties inherent in the special
relations of authority or superiority existing between the person called upon
to repair the damage and the one who, by his act or omission, was the
cause of it.

On the other hand, the liability of masters and employers for the negligent
acts or omissions of their servants or agents, when such acts or omissions
cause damages which amount to the breach of a contact, is not based
upon a mere presumption of the master's negligence in their selection or
control, and proof of exercise of the utmost diligence and care in this regard
does not relieve the master of his liability for the breach of his contract.

Every legal obligation must of necessity be extra-contractual or contractual.

Extra-contractual obligation has its source in the breach or omission of
those mutual duties which civilized society imposes upon it members, or
which arise from these relations, other than contractual, of certain members
of society to others, generally embraced in the concept of status. The legal
rights of each member of society constitute the measure of the
corresponding legal duties, mainly negative in character, which the
existence of those rights imposes upon all other members of society. The
breach of these general duties whether due to willful intent or to mere
inattention, if productive of injury, give rise to an obligation to indemnify the
injured party. The fundamental distinction between obligations of this
character and those which arise from contract, rests upon the fact that in
cases of non-contractual obligation it is the wrongful or negligent act or
omission itself which creates the vinculum juris, whereas in contractual
relations the vinculum exists independently of the breach of the voluntary
duty assumed by the parties when entering into the contractual relation.

With respect to extra-contractual obligation arising from negligence,

whether of act or omission, it is competent for the legislature to elect — and
our Legislature has so elected — whom such an obligation is imposed is
morally culpable, or, on the contrary, for reasons of public policy, to extend
that liability, without regard to the lack of moral culpability, so as to include
responsibility for the negligence of those person who acts or mission are
imputable, by a legal fiction, to others who are in a position to exercise an
absolute or limited control over them. The legislature which adopted our
Civil Code has elected to limit extra-contractual liability — with certain well-
defined exceptions — to cases in which moral culpability can be directly
imputed to the persons to be charged. This moral responsibility may consist
in having failed to exercise due care in the selection and control of one's
agents or servants, or in the control of persons who, by reason of their
status, occupy a position of dependency with respect to the person made
liable for their conduct.

The position of a natural or juridical person who has undertaken by contract

to render service to another, is wholly different from that to which article
1903 relates. When the sources of the obligation upon which plaintiff's
cause of action depends is a negligent act or omission, the burden of proof
rests upon plaintiff to prove the negligence — if he does not his action fails.
But when the facts averred show a contractual undertaking by defendant
for the benefit of plaintiff, and it is alleged that plaintiff has failed or refused
to perform the contract, it is not necessary for plaintiff to specify in his
pleadings whether the breach of the contract is due to willful fault or to
negligence on the part of the defendant, or of his servants or agents. Proof
of the contract and of its nonperformance is sufficient prima facie to warrant
a recovery.

As a general rule . . . it is logical that in case of extra-contractual culpa, a

suing creditor should assume the burden of proof of its existence, as the
only fact upon which his action is based; while on the contrary, in a case of
negligence which presupposes the existence of a contractual obligation, if
the creditor shows that it exists and that it has been broken, it is not
necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p.
76]).

As it is not necessary for the plaintiff in an action for the breach of a

contract to show that the breach was due to the negligent conduct of
defendant or of his servants, even though such be in fact the actual cause
of the breach, it is obvious that proof on the part of defendant that the
negligence or omission of his servants or agents caused the breach of the
contract would not constitute a defense to the action. If the negligence of
servants or agents could be invoked as a means of discharging the liability
arising from contract, the anomalous result would be that person acting
through the medium of agents or servants in the performance of their
contracts, would be in a better position than those acting in person. If one
delivers a valuable watch to watchmaker who contract to repair it, and the
bailee, by a personal negligent act causes its destruction, he is
unquestionably liable. Would it be logical to free him from his liability for the
breach of his contract, which involves the duty to exercise due care in the
preservation of the watch, if he shows that it was his servant whose
negligence caused the injury? If such a theory could be accepted, juridical
persons would enjoy practically complete immunity from damages arising
from the breach of their contracts if caused by negligent acts as such
juridical persons can of necessity only act through agents or servants, and
it would no doubt be true in most instances that reasonable care had been
taken in selection and direction of such servants. If one delivers securities
to a banking corporation as collateral, and they are lost by reason of the
negligence of some clerk employed by the bank, would it be just and
reasonable to permit the bank to relieve itself of liability for the breach of its
contract to return the collateral upon the payment of the debt by proving
that due care had been exercised in the selection and direction of the
clerk?

This distinction between culpa aquiliana, as the source of an obligation,

and culpa contractual as a mere incident to the performance of a contract
has frequently been recognized by the supreme court of Spain.
(Sentencias of June 27, 1894; November 20, 1896; and December 13,
1896.) In the decisions of November 20, 1896, it appeared that plaintiff's
action arose ex contractu, but that defendant sought to avail himself of the
provisions of article 1902 of the Civil Code as a defense. The Spanish
Supreme Court rejected defendant's contention, saying:

These are not cases of injury caused, without any pre-existing obligation,
by fault or negligence, such as those to which article 1902 of the Civil Code
relates, but of damages caused by the defendant's failure to carry out the
undertakings imposed by the contracts . . . .

A brief review of the earlier decision of this court involving the liability of
employers for damage done by the negligent acts of their servants will
show that in no case has the court ever decided that the negligence of the
defendant's servants has been held to constitute a defense to an action for
damages for breach of contract.

In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the
owner of a carriage was not liable for the damages caused by the
negligence of his driver. In that case the court commented on the fact that
no evidence had been adduced in the trial court that the defendant had
been negligent in the employment of the driver, or that he had any
knowledge of his lack of skill or carefulness.
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6
Phil. Rep., 215), the plaintiff sued the defendant for damages caused by
the loss of a barge belonging to plaintiff which was allowed to get adrift by
the negligence of defendant's servants in the course of the performance of
a contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that
if the "obligation of the defendant grew out of a contract made between it
and the plaintiff . . . we do not think that the provisions of articles 1902 and
1903 are applicable to the case."

In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued
the defendant to recover damages for the personal injuries caused by the
negligence of defendant's chauffeur while driving defendant's automobile in
which defendant was riding at the time. The court found that the damages
were caused by the negligence of the driver of the automobile, but held that
the master was not liable, although he was present at the time, saying:

. . . unless the negligent acts of the driver are continued for a length of time
as to give the owner a reasonable opportunity to observe them and to
direct the driver to desist therefrom. . . . The act complained of must be
continued in the presence of the owner for such length of time that the
owner by his acquiescence, makes the driver's acts his own.

In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage &
Taxicab Co. (33 Phil. Rep., 8), it is true that the court rested its conclusion
as to the liability of the defendant upon article 1903, although the facts
disclosed that the injury complaint of by plaintiff constituted a breach of the
duty to him arising out of the contract of transportation. The express ground
of the decision in this case was that article 1903, in dealing with the liability
of a master for the negligent acts of his servants "makes the distinction
between private individuals and public enterprise;" that as to the latter the
law creates a rebuttable presumption of negligence in the selection or
direction of servants; and that in the particular case the presumption of
negligence had not been overcome.

It is evident, therefore that in its decision Yamada case, the court treated
plaintiff's action as though founded in tort rather than as based upon the
breach of the contract of carriage, and an examination of the pleadings and
of the briefs shows that the questions of law were in fact discussed upon
this theory. Viewed from the standpoint of the defendant the practical result
must have been the same in any event. The proof disclosed beyond doubt
that the defendant's servant was grossly negligent and that his negligence
was the proximate cause of plaintiff's injury. It also affirmatively appeared
that defendant had been guilty of negligence in its failure to exercise proper
discretion in the direction of the servant. Defendant was, therefore, liable
for the injury suffered by plaintiff, whether the breach of the duty were to be
regarded as constituting culpa aquiliana or culpa contractual. As Manresa
points out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in
the course of the performance of a contractual undertaking or its itself the
source of an extra-contractual undertaking obligation, its essential
characteristics are identical. There is always an act or omission productive
of damage due to carelessness or inattention on the part of the defendant.
Consequently, when the court holds that a defendant is liable in damages
for having failed to exercise due care, either directly, or in failing to exercise
proper care in the selection and direction of his servants, the practical
result is identical in either case. Therefore, it follows that it is not to be
inferred, because the court held in the Yamada case that defendant was
liable for the damages negligently caused by its servants to a person to
whom it was bound by contract, and made reference to the fact that the
defendant was negligent in the selection and control of its servants, that in
such a case the court would have held that it would have been a good
defense to the action, if presented squarely upon the theory of the breach
of the contract, for defendant to have proved that it did in fact exercise care
in the selection and control of the servant.

The true explanation of such cases is to be found by directing the attention

to the relative spheres of contractual and extra-contractual obligations. The
field of non- contractual obligation is much more broader than that of
contractual obligations, comprising, as it does, the whole extent of juridical
human relations. These two fields, figuratively speaking, concentric; that is
to say, the mere fact that a person is bound to another by contract does not
relieve him from extra-contractual liability to such person. When such a
contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes the source of an extra-
contractual obligation had no contract existed between the parties.

The contract of defendant to transport plaintiff carried with it, by implication,

the duty to carry him in safety and to provide safe means of entering and
leaving its trains (civil code, article 1258). That duty, being contractual, was
direct and immediate, and its non-performance could not be excused by
proof that the fault was morally imputable to defendant's servants.
The railroad company's defense involves the assumption that even
granting that the negligent conduct of its servants in placing an obstruction
upon the platform was a breach of its contractual obligation to maintain
safe means of approaching and leaving its trains, the direct and proximate
cause of the injury suffered by plaintiff was his own contributory negligence
in failing to wait until the train had come to a complete stop before alighting.
Under the doctrine of comparative negligence announced in the Rakes
case (supra), if the accident was caused by plaintiff's own negligence, no
liability is imposed upon defendant's negligence and plaintiff's negligence
merely contributed to his injury, the damages should be apportioned. It is,
therefore, important to ascertain if defendant was in fact guilty of
negligence.

It may be admitted that had plaintiff waited until the train had come to a full
stop before alighting, the particular injury suffered by him could not have
occurred. Defendant contends, and cites many authorities in support of the
contention, that it is negligence per se for a passenger to alight from a
moving train. We are not disposed to subscribe to this doctrine in its
absolute form. We are of the opinion that this proposition is too badly stated
and is at variance with the experience of every-day life. In this particular
instance, that the train was barely moving when plaintiff alighted is shown
conclusively by the fact that it came to stop within six meters from the place
where he stepped from it. Thousands of person alight from trains under
these conditions every day of the year, and sustain no injury where the
company has kept its platform free from dangerous obstructions. There is
no reason to believe that plaintiff would have suffered any injury whatever
in alighting as he did had it not been for defendant's negligent failure to
perform its duty to provide a safe alighting place.

We are of the opinion that the correct doctrine relating to this subject is that
expressed in Thompson's work on Negligence (vol. 3, sec. 3010) as
follows:

The test by which to determine whether the passenger has been guilty of
negligence in attempting to alight from a moving railway train, is that of
ordinary or reasonable care. It is to be considered whether an ordinarily
prudent person, of the age, sex and condition of the passenger, would have
acted as the passenger acted under the circumstances disclosed by the
evidence. This care has been defined to be, not the care which may or
should be used by the prudent man generally, but the care which a man of
ordinary prudence would use under similar circumstances, to avoid
injury." (Thompson, Commentaries on Negligence, vol. 3, sec. 3010.)

Or, it we prefer to adopt the mode of exposition used by this court in

Picart vs. Smith (37 Phil. rep., 809), we may say that the test is this; Was
there anything in the circumstances surrounding the plaintiff at the time he
alighted from the train which would have admonished a person of average
prudence that to get off the train under the conditions then existing was
dangerous? If so, the plaintiff should have desisted from alighting; and his
failure so to desist was contributory negligence. 1awph!l.net

As the case now before us presents itself, the only fact from which a
conclusion can be drawn to the effect that plaintiff was guilty of contributory
negligence is that he stepped off the car without being able to discern
clearly the condition of the platform and while the train was yet slowly
moving. In considering the situation thus presented, it should not be
overlooked that the plaintiff was, as we find, ignorant of the fact that the
obstruction which was caused by the sacks of melons piled on the platform
existed; and as the defendant was bound by reason of its duty as a public
carrier to afford to its passengers facilities for safe egress from its trains,
the plaintiff had a right to assume, in the absence of some circumstance to
warn him to the contrary, that the platform was clear. The place, as we have
already stated, was dark, or dimly lighted, and this also is proof of a failure
upon the part of the defendant in the performance of a duty owing by it to
the plaintiff; for if it were by any possibility concede that it had right to pile
these sacks in the path of alighting passengers, the placing of them
adequately so that their presence would be revealed.

As pertinent to the question of contributory negligence on the part of the

plaintiff in this case the following circumstances are to be noted: The
company's platform was constructed upon a level higher than that of the
roadbed and the surrounding ground. The distance from the steps of the
car to the spot where the alighting passenger would place his feet on the
platform was thus reduced, thereby decreasing the risk incident to stepping
off. The nature of the platform, constructed as it was of cement material,
also assured to the passenger a stable and even surface on which to alight.
Furthermore, the plaintiff was possessed of the vigor and agility of young
manhood, and it was by no means so risky for him to get off while the train
was yet moving as the same act would have been in an aged or feeble
person. In determining the question of contributory negligence in
performing such act — that is to say, whether the passenger acted
prudently or recklessly — the age, sex, and physical condition of the
passenger are circumstances necessarily affecting the safety of the
passenger, and should be considered. Women, it has been observed, as a
general rule are less capable than men of alighting with safety under such
conditions, as the nature of their wearing apparel obstructs the free
movement of the limbs. Again, it may be noted that the place was perfectly
familiar to the plaintiff as it was his daily custom to get on and of the train at
this station. There could, therefore, be no uncertainty in his mind with
regard either to the length of the step which he was required to take or the
character of the platform where he was alighting. Our conclusion is that the
conduct of the plaintiff in undertaking to alight while the train was yet
slightly under way was not characterized by imprudence and that therefore
he was not guilty of contributory negligence.

The evidence shows that the plaintiff, at the time of the accident, was
earning P25 a month as a copyist clerk, and that the injuries he has
suffered have permanently disabled him from continuing that employment.
Defendant has not shown that any other gainful occupation is open to
plaintiff. His expectancy of life, according to the standard mortality tables, is
approximately thirty-three years. We are of the opinion that a fair
compensation for the damage suffered by him for his permanent disability
is the sum of P2,500, and that he is also entitled to recover of defendant
the additional sum of P790.25 for medical attention, hospital services, and
other incidental expenditures connected with the treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered

plaintiff for the sum of P3,290.25, and for the costs of both instances. So
ordered.

Arellano, C.J., Torres, Street and Avanceña, JJ., concur.

Separate Opinions

MALCOLM, J., dissenting:

With one sentence in the majority decision, we are of full accord, namely, "It
may be admitted that had plaintiff waited until the train had come to a full
stop before alighting, the particular injury suffered by him could not have
occurred." With the general rule relative to a passenger's contributory
negligence, we are likewise in full accord, namely, "An attempt to alight
from a moving train is negligence per se." Adding these two points together,
should be absolved from the complaint, and judgment affirmed.

Johnson, J., concur.

—————————————————————————————————

Case 13. Gutierrez vs Gutierrez 56 Phil 177

EN BANC

G.R. No. 34840 September 23, 1931

NARCISO GUTIERREZ, plaintiff-appellee, 


vs.

BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL
GUTIERREZ, ABELARDO VELASCO, and SATURNINO
CORTEZ, defendants-appellants.

L.D. Lockwood for appellants Velasco and Cortez.


San Agustin and Roxas for other appellants.

Ramon Diokno for appellee.

MALCOLM, J.:

This is an action brought by the plaintiff in the Court of First Instance of

Manila against the five defendants, to recover damages in the amount of
P10,000, for physical injuries suffered as a result of an automobile
accident. On judgment being rendered as prayed for by the plaintiff, both
sets of defendants appealed.

On February 2, 1930, a passenger truck and an automobile of private

ownership collided while attempting to pass each other on the Talon bridge
on the Manila South Road in the municipality of Las Piñas, Province of
Rizal. The truck was driven by the chauffeur Abelardo Velasco, and was
owned by Saturnino Cortez. The automobile was being operated by
Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio's
father and mother, Mr. and Mrs. Manuel Gutierrez. At the time of the
collision, the father was not in the car, but the mother, together will several
other members of the Gutierrez family, seven in all, were accommodated
therein. A passenger in the autobus, by the name of Narciso Gutierrez, was
en route from San Pablo, Laguna, to Manila. The collision between the bus
and the automobile resulted in Narciso Gutierrez suffering a fracture right
leg which required medical attendance for a considerable period of time,
and which even at the date of the trial appears not to have healed properly.

It is conceded that the collision was caused by negligence pure and simple.
The difference between the parties is that, while the plaintiff blames both
sets of defendants, the owner of the passenger truck blames the
automobile, and the owner of the automobile, in turn, blames the truck. We
have given close attention to these highly debatable points, and having
done so, a majority of the court are of the opinion that the findings of the
trial judge on all controversial questions of fact find sufficient support in the
record, and so should be maintained. With this general statement set down,
we turn to consider the respective legal obligations of the defendants.

In amplification of so much of the above pronouncement as concerns the

Gutierrez family, it may be explained that the youth Bonifacio was in
incompetent chauffeur, that he was driving at an excessive rate of speed,
and that, on approaching the bridge and the truck, he lost his head and so
contributed by his negligence to the accident. The guaranty given by the
father at the time the son was granted a license to operate motor vehicles
made the father responsible for the acts of his son. Based on these facts,
pursuant to the provisions of article 1903 of the Civil Code, the father alone
and not the minor or the mother, would be liable for the damages caused
by the minor.

We are dealing with the civil law liability of parties for obligations which
arise from fault or negligence. At the same time, we believe that, as has
been done in other cases, we can take cognizance of the common law rule
on the same subject. In the United States, it is uniformly held that the head
of a house, the owner of an automobile, who maintains it for the general
use of his family is liable for its negligent operation by one of his children,
whom he designates or permits to run it, where the car is occupied and
being used at the time of the injury for the pleasure of other members of the
owner's family than the child driving it. The theory of the law is that the
running of the machine by a child to carry other members of the family is
within the scope of the owner's business, so that he is liable for the
negligence of the child because of the relationship of master and servant.
(Huddy On Automobiles, 6th ed., sec. 660; Missell vs. Hayes [1914], 91
Atl., 322.) The liability of Saturnino Cortez, the owner of the truck, and of
his chauffeur Abelardo Velasco rests on a different basis, namely, that of
contract which, we think, has been sufficiently demonstrated by the
allegations of the complaint, not controverted, and the evidence. The
reason for this conclusion reaches to the findings of the trial court
concerning the position of the truck on the bridge, the speed in operating
the machine, and the lack of care employed by the chauffeur. While these
facts are not as clearly evidenced as are those which convict the other
defendant, we nevertheless hesitate to disregard the points emphasized by
the trial judge. In its broader aspects, the case is one of two drivers
approaching a narrow bridge from opposite directions, with neither being
willing to slow up and give the right of way to the other, with the inevitable
result of a collision and an accident.

The defendants Velasco and Cortez further contend that there existed
contributory negligence on the part of the plaintiff, consisting principally of
his keeping his foot outside the truck, which occasioned his injury. In this
connection, it is sufficient to state that, aside from the fact that the defense
of contributory negligence was not pleaded, the evidence bearing out this
theory of the case is contradictory in the extreme and leads us far afield
into speculative matters.

The last subject for consideration relates to the amount of the award. The
appellee suggests that the amount could justly be raised to P16,517, but
naturally is not serious in asking for this sum, since no appeal was taken by
him from the judgment. The other parties unite in challenging the award of
P10,000, as excessive. All facts considered, including actual expenditures
and damages for the injury to the leg of the plaintiff, which may cause him
permanent lameness, in connection with other adjudications of this court,
lead us to conclude that a total sum for the plaintiff of P5,000 would be fair
and reasonable. The difficulty in approximating the damages by monetary
compensation is well elucidated by the divergence of opinion among the
members of the court, three of whom have inclined to the view that P3,000
would be amply sufficient, while a fourth member has argued that P7,500
would be none too much.
In consonance with the foregoing rulings, the judgment appealed from will
be modified, and the plaintiff will have judgment in his favor against the
defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez,
jointly and severally, for the sum of P5,000, and the costs of both instances.

Avanceña, C.J., Johnson, Street, Villamor, Ostrand, Romualdez, and

Imperial, JJ., concur.

VILLA-REAL, J.:

I vote for an indemnity of P7,500.

—————————————————————————————————

Case 14. Hongkong and Shanghai Banking Corp. vs Sps. Broqueza

SECOND DIVISION

G.R. No. 178610 November 17, 2010

HONGKONG AND SHANGHAI BANKING CORP., LTD. STAFF

RETIREMENT PLAN, Retirement Trust Fund, Inc.) Petitioner, 

vs.

SPOUSES BIENVENIDO AND EDITHA BROQUEZA, Respondents.

DECISION

CARPIO, J.:

G.R. No. 178610 is a petition for review1 assailing the

Decision2 promulgated on 30 March 2006 by the Court of Appeals (CA) in
CA-G.R. SP No. 62685. The appellate court granted the petition filed by Fe
Gerong (Gerong) and Spouses Bienvenido and Editha Broqueza (spouses
Broqueza) and dismissed the consolidated complaints filed by Hongkong
and Shanghai Banking Corporation, Ltd. - Staff Retirement Plan (HSBCL-
SRP) for recovery of sum of money. The appellate court reversed and set
aside the Decision3 of Branch 139 of the Regional Trial Court of Makati City
(RTC) in Civil Case No. 00-787 dated 11 December 2000, as well as its
Order4 dated 5 September 2000. The RTC’s decision affirmed the
Decision5 dated 28 December 1999 of Branch 61 of the Metropolitan Trial
Court (MeTC) of Makati City in Civil Case No. 52400 for Recovery of a Sum
of Money.

The Facts

The appellate court narrated the facts as follows:

Petitioners Gerong and [Editha] Broqueza (defendants below) are

employees of Hongkong and Shanghai Banking Corporation (HSBC). They
are also members of respondent Hongkong Shanghai Banking Corporation,
Ltd. Staff Retirement Plan (HSBCL-SRP, plaintiff below). The HSBCL-SRP
is a retirement plan established by HSBC through its Board of Trustees for
the benefit of the employees.

On October 1, 1990, petitioner [Editha] Broqueza obtained a car loan in the

amount of Php175,000.00. On December 12, 1991, she again applied and
was granted an appliance loan in the amount of Php24,000.00. On the
other hand, petitioner Gerong applied and was granted an emergency loan
in the amount of Php35,780.00 on June 2, 1993. These loans are paid
through automatic salary deduction.

Meanwhile [in 1993], a labor dispute arose between HSBC and its
employees. Majority of HSBC’s employees were terminated, among whom
are petitioners Editha Broqueza and Fe Gerong. The employees then filed
an illegal dismissal case before the National Labor Relations Commission
(NLRC) against HSBC. The legality or illegality of such termination is now
pending before this appellate Court in CA G.R. CV No. 56797,
entitled Hongkong Shanghai Banking Corp. Employees Union, et al. vs.
National Labor Relations Commission, et al.

Because of their dismissal, petitioners were not able to pay the monthly
amortizations of their respective loans. Thus, respondent HSBCL-SRP
considered the accounts of petitioners delinquent. Demands to pay the
respective obligations were made upon petitioners, but they failed to pay.6

HSBCL-SRP, acting through its Board of Trustees and represented by

Alejandro L. Custodio, filed Civil Case No. 52400 against the spouses
Broqueza on 31 July 1996. On 19 September 1996, HSBCL-SRP filed Civil
Case No. 52911 against Gerong. Both suits were civil actions for recovery
and collection of sums of money.
 The Metropolitan Trial Court’s Ruling

On 28 December 1999, the MeTC promulgated its Decision7 in favor of

HSBCL-SRP. The MeTC ruled that the nature of HSBCL-SRP’s demands
for payment is civil and has no connection to the ongoing labor dispute.
Gerong and Editha Broqueza’s termination from employment resulted in
the loss of continued benefits under their retirement plans. Thus, the loans
secured by their future retirement benefits to which they are no longer
entitled are reduced to unsecured and pure civil obligations. As unsecured
and pure obligations, the loans are immediately demandable.

The dispositive portion of the MeTC’s decision reads:

WHEREFORE, premises considered and in view of the foregoing, the

Court finds that the plaintiff was able to prove by a preponderance of
evidence the existence and immediate demandability of the defendants’
loan obligations as judgment is hereby rendered in favor of the plaintiff and
against the defendants in both cases, ordering the latter:

1. In Civil Case No. 52400, to pay the amount of Php116,740.00 at six

percent interest per annum from the time of demand and in Civil Case No.
52911, to pay the amount of Php25,344.12 at six percent per annum from
the time of the filing of these cases, until the amount is fully paid;

2. To pay the amount of Php20,000.00 each as reasonable attorney’s fees;

3. Cost of suit.

SO ORDERED.8

Gerong and the spouses Broqueza filed a joint appeal of the MeTC’s
decision before the RTC. Gerong’s case was docketed Civil Case No.
00-786, while the spouses Broqueza’s case was docketed as Civil Case
No. 00-787.

The Regional Trial Court’s Ruling

The RTC initially denied the joint appeal because of the belated filing of
Gerong and the spouses Broqueza’s memorandum. The RTC later
reconsidered the order of denial and resolved the issues in the interest of
justice.
On 11 December 2000, the RTC affirmed the MeTC’s decision in toto.9

The RTC ruled that Gerong and Editha Broqueza’s termination from
employment disqualified them from availing of benefits under their
retirement plans. As a consequence, there is no longer any security for the
loans. HSBCL-SRP has a legal right to demand immediate settlement of
the unpaid balance because of Gerong and Editha Broqueza’s continued
default in payment and their failure to provide new security for their loans.
Moreover, the absence of a period within which to pay the loan allows
HSBCL-SRP to demand immediate payment. The loan obligations are
considered pure obligations, the fulfillment of which are demandable at
once.

Gerong and the spouses Broqueza then filed a Petition for Review under
Rule 42 before the CA.

The Ruling of the Court of Appeals

On 30 March 2006, the CA rendered its Decision10 which reversed the 11

December 2000 Decision of the RTC. The CA ruled that the HSBCL-SRP’s
complaints for recovery of sum of money against Gerong and the spouses
Broqueza are premature as the loan obligations have not yet matured.
Thus, no cause of action accrued in favor of HSBCL-SRP. The dispositive
portion of the appellate court’s Decision reads as follows:

WHEREFORE, the assailed Decision of the RTC is REVERSED and SET

ASIDE. A new one is hereby rendered DISMISSING the consolidated
complaints for recovery of sum of money.

SO ORDERED.11

HSBCL-SRP filed a motion for reconsideration which the CA denied for lack
of merit in its Resolution12 promulgated on 19 June 2007.

On 6 August 2007, HSBCL-SRP filed a manifestation withdrawing the

petition against Gerong because she already settled her obligations. In a
Resolution13 of this Court dated 10 September 2007, this Court treated the
manifestation as a motion to withdraw the petition against Gerong, granted
the motion, and considered the case against Gerong closed and
terminated.
 Issues

HSBCL-SRP enumerated the following grounds to support its Petition:

I. The Court of Appeals has decided a question of substance in a way not in

accord with law and applicable decisions of this Honorable Court; and

II. The Court of Appeals has departed from the accepted and usual course
of judicial proceedings in reversing the decision of the Regional Trial Court
and the Metropolitan Trial Court.14

The Court’s Ruling

The petition is meritorious. We agree with the rulings of the MeTC and the
RTC.

The Promissory Notes uniformly provide:

PROMISSORY NOTE

P_____ Makati, M.M. ____ 19__

FOR VALUE RECEIVED, I/WE _____ jointly and severally promise to pay
to THE HSBC RETIREMENT PLAN (hereinafter called the "PLAN") at its
office in the Municipality of Makati, Metro Manila, on or before until fully
paid the sum of PESOS ___ (P___) Philippine Currency without discount,
with interest from date hereof at the rate of Six per cent (6%) per annum,
payable monthly.

I/WE agree that the PLAN may, upon written notice, increase the interest
rate stipulated in this note at any time depending on prevailing conditions.

I/WE hereby expressly consent to any extensions or renewals hereof for a

portion or whole of the principal without notice to the other(s), and in such a
case our liability shall remain joint and several.
1avvphi1

In case collection is made by or through an attorney, I/WE jointly and

severally agree to pay ten percent (10%) of the amount due on this note
(but in no case less than P200.00) as and for attorney’s fees in addition to
expenses and costs of suit.
In case of judicial execution, I/WE hereby jointly and severally waive our
rights under the provisions of Rule 39, Section 12 of the Rules of Court.15

In ruling for HSBCL-SRP, we apply the first paragraph of Article 1179 of the
Civil Code:

Art. 1179. Every obligation whose performance does not depend upon a
future or uncertain event, or upon a past event unknown to the parties,
is demandable at once.

x x x. (Emphasis supplied.)

We affirm the findings of the MeTC and the RTC that there is no date of
payment indicated in the Promissory Notes. The RTC is correct in ruling
that since the Promissory Notes do not contain a period, HSBCL-SRP has
the right to demand immediate payment. Article 1179 of the Civil Code
applies. The spouses Broqueza’s obligation to pay HSBCL-SRP is a pure
obligation. The fact that HSBCL-SRP was content with the prior monthly
check-off from Editha Broqueza’s salary is of no moment. Once Editha
Broqueza defaulted in her monthly payment, HSBCL-SRP made a demand
to enforce a pure obligation.

In their Answer, the spouses Broqueza admitted that prior to Editha

Broqueza’s dismissal from HSBC in December 1993, she "religiously paid
the loan amortizations, which HSBC collected through payroll check-
off."16 A definite amount is paid to HSBCL-SRP on a specific date. Editha
Broqueza authorized HSBCL-SRP to make deductions from her payroll
until her loans are fully paid. Editha Broqueza, however, defaulted in her
monthly loan payment due to her dismissal. Despite the spouses
Broqueza’s protestations, the payroll deduction is merely a convenient
mode of payment and not the sole source of payment for the loans.
HSBCL-SRP never agreed that the loans will be paid only through salary
deductions. Neither did HSBCL-SRP agree that if Editha Broqueza ceases
to be an employee of HSBC, her obligation to pay the loans will be
suspended. HSBCL-SRP can immediately demand payment of the loans at
anytime because the obligation to pay has no period. Moreover, the
spouses Broqueza have already incurred in default in paying the monthly
installments.

Finally, the enforcement of a loan agreement involves "debtor-creditor

relations founded on contract and does not in any way concern employee
relations. As such it should be enforced through a separate civil action in
the regular courts and not before the Labor Arbiter."17

WHEREFORE, we GRANT the petition. The Decision of the Court of

Appeals in CA-G.R. SP No. 62685 promulgated on 30 March 2006
is REVERSED and SET ASIDE. The decision of Branch 139 of the
Regional Trial Court of Makati City in Civil Case No. 00-787, as well as the
decision of Branch 61 of the Metropolitan Trial Court of Makati City in Civil
Case No. 52400 against the spouses Bienvenido and Editha Broqueza,
are AFFIRMED. Costs against respondents.

SO ORDERED.

—————————————————————————————————

Case 15. Pay vs Palanca 57 SCRA 618

SECOND DIVISION

G.R. No. L-29900 June 28, 1974

IN THE MATTER OF THE INTESTATE ESTATE OF JUSTO PALANCA,

Deceased, GEORGE PAY, petitioner-appellant, 

vs.

SEGUNDINA CHUA VDA. DE PALANCA, oppositor-appellee.

Florentino B. del Rosario for petitioner-appellant.

Manuel V. San Jose for oppositor-appellee.

FERNANDO, J.:p
There is no difficulty attending the disposition of this appeal by petitioner on questions of law. While several points
were raised, the decisive issue is whether a creditor is barred by prescription in his attempt to collect on a promissory
note executed more than fifteen years earlier with the debtor sued promising to pay either upon receipt by him of his
share from a certain estate or upon demand, the basis for the action being the latter alternative. The lower court held
that the ten-year period of limitation of actions did apply, the note being immediately due and demandable, the
creditor admitting expressly that he was relying on the wording "upon demand." On the above facts as found, and
with the law being as it is, it cannot be said that its decision is infected with error. We affirm.
From the appealed decision, the following appears: "The parties in this
case agreed to submit the matter for resolution on the basis of their
pleadings and annexes and their respective memoranda submitted.
Petitioner George Pay is a creditor of the Late Justo Palanca who died in
Manila on July 3, 1963. The claim of the petitioner is based on a
promissory note dated January 30, 1952, whereby the late Justo Palanca
and Rosa Gonzales Vda. de Carlos Palanca promised to pay George Pay
the amount of P26,900.00, with interest thereon at the rate of 12% per
annum. George Pay is now before this Court, asking that Segundina Chua
vda. de Palanca, surviving spouse of the late Justo Palanca, he appointed
as administratrix of a certain piece of property which is a residential
dwelling located at 2656 Taft Avenue, Manila, covered by Tax Declaration
No. 3114 in the name of Justo Palanca, assessed at P41,800.00. The idea
is that once said property is brought under administration, George Pay, as
creditor, can file his claim against the administratrix."1 It then stated that the
petition could not prosper as there was a refusal on the part of Segundina
Chua Vda. de Palanca to be appointed as administratrix; that the property
sought to be administered no longer belonged to the debtor, the late Justo
Palanca; and that the rights of petitioner-creditor had already prescribed.
The promissory note, dated January 30, 1962, is worded thus: " `For value
received from time to time since 1947, we [jointly and severally promise to]
pay to Mr. [George Pay] at his office at the China Banking Corporation the
sum of [Twenty Six Thousand Nine Hundred Pesos] (P26,900.00), with
interest thereon at the rate of 12% per annum upon receipt by either of the
undersigned of cash payment from the Estate of the late Don Carlos
Palanca or upon demand'. . . . As stated, this promissory note is signed by
Rosa Gonzales Vda. de Carlos Palanca and Justo Palanca."2 Then came
this paragraph: "The Court has inquired whether any cash payment has
been received by either of the signers of this promissory note from the
Estate of the late Carlos Palanca. Petitioner informed that he does not
insist on this provision but that petitioner is only claiming on his right under
the promissory note ."3 After which, came the ruling that the wording of the
promissory note being "upon demand," the obligation was immediately due.
Since it was dated January 30, 1952, it was clear that more "than ten (10)
years has already transpired from that time until to date. The action,
therefore, of the creditor has definitely prescribed."4 The result, as above
noted, was the dismissal of the petition.

In an exhaustive brief prepared by Attorney Florentino B. del Rosario,

petitioner did assail the correctness of the rulings of the lower court as to
the effect of the refusal of the surviving spouse of the late Justo Palanca to
be appointed as administratrix, as to the property sought to be
administered no longer belonging to the debtor, the late Justo Palanca, and
as to the rights of petitioner-creditor having already prescribed. As noted at
the outset, only the question of prescription need detain us in the
disposition of this appeal. Likewise, as intimated, the decision must be
affirmed, considering the clear tenor of the promissory note.

From the manner in which the promissory note was executed, it would
appear that petitioner was hopeful that the satisfaction of his credit could he
realized either through the debtor sued receiving cash payment from the
estate of the late Carlos Palanca presumptively as one of the heirs, or, as
expressed therein, "upon demand." There is nothing in the record that
would indicate whether or not the first alternative was fulfilled. What is
undeniable is that on August 26, 1967, more than fifteen years after the
execution of the promissory note on January 30, 1952, this petition was
filed. The defense interposed was prescription. Its merit is rather obvious.
Article 1179 of the Civil Code provides: "Every obligation whose
performance does not depend upon a future or uncertain event, or upon a
past event unknown to the parties, is demandable at once." This used to be
Article 1113 of the Spanish Civil Code of 1889. As far back as Floriano v.
Delgado,5 a 1908 decision, it has been applied according to its express
language. The well-known Spanish commentator, Manresa, on this point,
states: "Dejando con acierto, el caracter mas teorico y grafico del acto, o
sea la perfeccion de este, se fija, para determinar el concepto de la
obligacion pura, en el distinctive de esta, y que es consecuencia de aquel:
la exigibilidad immediata."6

The obligation being due and demandable, it would appear that the filing of
the suit after fifteen years was much too late. For again, according to the
Civil Code, which is based on Section 43 of Act No. 190, the prescriptive
period for a written contract is that of ten years.7 This is another instance
where this Court has consistently adhered to the express language of the
applicable norm.8 There is no necessity therefore of passing upon the other
legal questions as to whether or not it did suffice for the petition to fail just
because the surviving spouse refuses to be made administratrix, or just
because the estate was left with no other property. The decision of the
lower court cannot be overturned.
WHEREFORE, the lower court decision of July 24, 1968 is affirmed. Costs
against George Pay.

Zaldivar (Chairman), Barredo, Antonio, Fernandez and Aquino, JJ., concur.

—————————————————————————————————

Case 16. Smith Bell vs Sotelo Matti 44 Phil 874

EN BANC

G.R. No. L-16570 March 9, 1922

SMITH, BELL & CO., LTD., plaintiff-appellant, 


vs.

VICENTE SOTELO MATTI, defendant-appellant.

Ross and Lawrence and Ewald E. Selph for plaintiff-appellant.


Ramon Sotelo for defendant-appellant.

ROMUALDEZ, J.:

In August, 1918, the plaintiff corporation and the defendant, Mr. Vicente
Sotelo, entered into contracts whereby the former obligated itself to sell,
and the latter to purchase from it, two steel tanks, for the total price of
twenty-one thousand pesos (P21,000), the same to be shipped from New
York and delivered at Manila "within three or four months;" two expellers at
the price of twenty five thousand pesos (P25,000) each, which were to be
shipped from San Francisco in the month of September, 1918, or as soon
as possible; and two electric motors at the price of two thousand pesos
(P2,000) each, as to the delivery of which stipulation was made, couched in
these words: "Approximate delivery within ninety days. — This is not
guaranteed."

The tanks arrived at Manila on the 27th of April, 1919: the expellers on the
26th of October, 1918; and the motors on the 27th of February, 1919.

The plaintiff corporation notified the defendant, Mr. Sotelo, of the arrival of
these goods, but Mr. Sotelo refused to receive them and to pay the prices
stipulated.
The plaintiff brought suit against the defendant, based on four separate
causes of action, alleging, among other facts, that it immediately notified
the defendant of the arrival of the goods, and asked instructions from him
as to the delivery thereof, and that the defendant refused to receive any of
them and to pay their price. The plaintiff, further, alleged that the expellers
and the motors were in good condition. (Amended complaint, pages 16-30,
Bill of Exceptions.)

In their answer, the defendant, Mr. Sotelo, and the intervenor, the Manila
Oil Refining and By-Products Co., Inc., denied the plaintiff's allegations as
to the shipment of these goods and their arrival at Manila, the notification to
the defendant, Mr. Sotelo, the latter's refusal to receive them and pay their
price, and the good condition of the expellers and the motors, alleging as
special defense that Mr. Sotelo had made the contracts in question as
manager of the intervenor, the Manila Oil Refining and By-Products Co., Inc
which fact was known to the plaintiff, and that "it was only in May, 1919,
that it notified the intervenor that said tanks had arrived, the motors and the
expellers having arrived incomplete and long after the date stipulated." As a
counterclaim or set-off, they also allege that, as a consequence of the
plaintiff's delay in making delivery of the goods, which the intervenor
intended to use in the manufacture of cocoanut oil, the intervenor suffered
damages in the sums of one hundred sixteen thousand seven hundred
eighty-three pesos and ninety-one centavos (P116,783.91) for the
nondelivery of the tanks, and twenty-one thousand two hundred and fifty
pesos (P21,250) on account of the expellers and the motors not having
arrived in due time.

The case having been tried, the court below absolved the defendants from
the complaint insofar as the tanks and the electric motors were concerned,
but rendered judgment against them, ordering them to "receive the
aforesaid expellers and pay the plaintiff the sum of fifty thousand pesos
(P50,00), the price of the said goods, with legal interest thereon from July
26, 1919, and costs."

Both parties appeal from this judgment, each assigning several errors in
the findings of the lower court.

The principal point at issue in this case is whether or not, under the
contracts entered into and the circumstances established in the record, the
plaintiff has fulfilled, in due time, its obligation to bring the goods in question
to Manila. If it has, then it is entitled to the relief prayed for; otherwise, it
must be held guilty of delay and liable for the consequences thereof.

To solve this question, it is necessary to determine what period was fixed

for the delivery of the goods.

As regards the tanks, the contracts A and B (pages 61 and 62 of the

record) are similar, and in both of them we find this clause:

To be delivered within 3 or 4 months — The promise or indication of

shipment carries with it absolutely no obligation on our part — Government
regulations, railroad embargoes, lack of vessel space, the exigencies of the
requirement of the United States Government, or a number of causes may
act to entirely vitiate the indication of shipment as stated. In other words,
the order is accepted on the basis of shipment at Mill's convenience, time
of shipment being merely an indication of what we hope to accomplish.

In the contract Exhibit C (page 63 of the record), with reference to the

expellers, the following stipulation appears:

The following articles, hereinbelow more particularly described, to be

shipped at San Francisco within the month of September /18, or as soon as
possible. — Two Anderson oil expellers . . . .

And in the contract relative to the motors (Exhibit D, page 64, rec.) the
following appears:

Approximate delivery within ninety days. — This is not guaranteed. — This

sale is subject to our being able to obtain Priority Certificate, subject to the
United States Government requirements and also subject to confirmation of
manufactures.

In all these contracts, there is a final clause as follows:

The sellers are not responsible for delays caused by fires, riots on land or
on the sea, strikes or other causes known as "Force Majeure" entirely
beyond the control of the sellers or their representatives.

Under these stipulations, it cannot be said that any definite date was fixed
for the delivery of the goods. As to the tanks, the agreement was that the
delivery was to be made "within 3 or 4 months," but that period was subject
to the contingencies referred to in a subsequent clause. With regard to the
expellers, the contract says "within the month of September, 1918," but to
this is added "or as soon as possible." And with reference to the motors,
the contract contains this expression, "Approximate delivery within ninety
days," but right after this, it is noted that "this is not guaranteed."

The oral evidence falls short of fixing such period.

From the record it appears that these contracts were executed at the time
of the world war when there existed rigid restrictions on the export from the
United States of articles like the machinery in question, and maritime, as
well as railroad, transportation was difficult, which fact was known to the
parties; hence clauses were inserted in the contracts, regarding
"Government regulations, railroad embargoes, lack of vessel space, the
exigencies of the requirements of the United States Government," in
connection with the tanks and "Priority Certificate, subject to the United
State Government requirements," with respect to the motors. At the time of
the execution of the contracts, the parties were not unmindful of the
contingency of the United States Government not allowing the export of the
goods, nor of the fact that the other foreseen circumstances therein stated
might prevent it.

Considering these contracts in the light of the civil law, we cannot but
conclude that the term which the parties attempted to fix is so uncertain
that one cannot tell just whether, as a matter of fact, those articles could be
brought to Manila or not. If that is the case, as we think it is, the obligations
must be regarded as conditional.

Obligations for the performance of which a day certain has been fixed shall
be demandable only when the day arrives.

A day certain is understood to be one which must necessarily arrive, even

though its date be unknown.

If the uncertainty should consist in the arrival or non-arrival of the day, the
obligation is conditional and shall be governed by the rules of the next
preceding section. (referring to pure and conditional obligations). (Art. 1125,
Civ. Code.)

And as the export of the machinery in question was, as stated in the

contract, contingent upon the sellers obtaining certificate of priority and
permission of the United States Government, subject to the rules and
regulations, as well as to railroad embargoes, then the delivery was subject
to a condition the fulfillment of which depended not only upon the effort of
the herein plaintiff, but upon the will of third persons who could in no way
be compelled to fulfill the condition. In cases like this, which are not
expressly provided for, but impliedly covered, by the Civil Code, the obligor
will be deemed to have sufficiently performed his part of the obligation, if he
has done all that was in his power, even if the condition has not been
fulfilled in reality.

In such cases, the decisions prior to the Civil Code have held that the
obligee having done all that was in his power, was entitled to enforce
performance of the obligation. This performance, which is fictitious — not
real — is not expressly authorized by the Code, which limits itself only to
declare valid those conditions and the obligation thereby affected; but it is
neither disallowed, and the Code being thus silent, the old view can be
maintained as a doctrine. (Manresa's commentaries on the Civil Code
[1907], vol. 8, page 132.)

The decisions referred to by Mr. Manresa are those rendered by the

supreme court of Spain on November 19, 1896, and February 23, 1871.

In the former it is held:

First. That when the fulfillment of the conditions does not depend on the will
of the obligor, but on that of a third person who can in no way be compelled
to carry it out, and it is found by the lower court that the obligor has done all
in his power to comply with the obligation, the judgment of the said court,
ordering the other party to comply with his part of the contract, is not
contrary to the law of contracts, or to Law 1, Tit. I, Book 10, of the
"Novísima Recopilación," or Law 12, Tit. 11, of Partida 5, when in the said
finding of the lower court, no law or precedent is alleged to have been
violated. (Jurisprudencia Civil published by the directors of the Revista
General de Legislacion y Jurisprudencia [1866], vol. 14, page 656.)

In the second decision, the following doctrine is laid down:

Second. That when the fulfillment of the condition does not depend on the
will of the obligor, but on that of a third person, who can in no way be
compelled to carry it out, the obligor's part of the contract is complied
withalf Belisario not having exercised his right of repurchase reserved in
the sale of Basilio Borja mentioned in paragraph (13) hereof, the affidavit of
Basilio Borja for the consolidacion de dominio was presented for record in
the registry of deeds and recorded in the registry on the same date.

(32) The Maximo Belisario left a widow, the opponent Adelina Ferrer and
three minor children, Vitaliana, Eugenio, and Aureno Belisario as his only
heirs.

(33) That in the execution and sales thereunder, in which C. H. McClure

appears as the judgment creditor, he was represented by the opponent
Peter W. Addison, who prepared and had charge of publication of the
notices of the various sales and that in none of the sales was the notice
published more than twice in a newspaper.

The claims of the opponent-appellant Addison have been very fully and
ably argued by his counsel but may, we think, be disposed of in
comparatively few words. As will be seen from the foregoing statement of
facts, he rest his title (1) on the sales under the executions issued in cases
Nos. 435, 450, 454, and 499 of the court of the justice of the peace of
Dagupan with the priority of inscription of the last two sales in the registry of
deeds, and (2) on a purchase from the Director of Lands after the land in
question had been forfeited to the Government for non-payment of taxes
under Act No. 1791.

The sheriff's sales under the execution mentioned are fatally defective for
what of sufficient publication of the notice of sale. Section 454 of the Code
of civil Procedure reads in part as follows:

SEC. 454. Before the sale of property on execution, notice thereof must be
given, as follows:

1. In case of perishable property, by posing written notice of the time and

place of the sale in three public places of the municipality or city where the
sale is to take place, for such time as may be reasonable, considering the
character and condition of the property;

2. * * * * * * *

3. In cases of real property, by posting a similar notice particularly

describing the property, for twenty days in three public places of the
municipality or city where the property is situated, and also where the
property is to be sold, and publishing a copy thereof once a week, for the
same period, in some newspaper published or having general circulation in
the province, if there be one. If there are newspaper published in the
province in both the Spanish and English languages, then a like publication
for a like period shall be made in one newspaper published in the Spanish
language, and in one published in the English language: Provided,
however, That such publication in a newspaper will not be required when
the assessed valuation of the property does not exceed four hundred
pesos;

4. * * * * * * *

Examining the record, we find that in cases Nos. 435 and 450 the sales
took place on October 14, 1916; the notice first published gave the date of
the sale as October 15th, but upon discovering that October 15th was a
Sunday, the date was changed to October 14th. The correct notice was
published twice in a local newspaper, the first publication was made on
October 7th and the second and last on October 14th, the date of the sale
itself. The newspaper is a weekly periodical published every Saturday
afternoon.

In case No. 454 there were only two publications of the notice in a
newspaper, the first publication being made only fourteen days before the
date of the sale. In case No. 499, there were also only two publications, the
first of which was made thirteen days before the sale. In the last case the
sale was advertised for the hours of from 8:30 in the morning until 4:30 in
the afternoon, in violation of section 457 of the Code of Civil Procedure. In
cases Nos. 435 and 450 the hours advertised were from 9:00 in the
morning until 4.30 in the afternoon. In all of the cases the notices of the
sale were prepared by the judgment creditor or his agent, who also took
charged of the publication of such notices.

In the case of Campomanes vs. Bartolome and Germann & Co. (38 Phil.,
808), this court held that if a sheriff sells without the notice prescribe by the
Code of Civil Procedure induced thereto by the judgment creditor and the
purchaser at the sale is the judgment creditor, the sale is absolutely void
and not title passes. This must now be regarded as the settled doctrine in
this jurisdiction whatever the rule may be elsewhere.

It appears affirmatively from the evidence in the present case that there is a
newspaper published in the province where the sale in question took place
and that the assessed valuation of the property disposed of at each sale
exceeded P400. Comparing the requirements of section 454, supra, with
what was actually done, it is self-evident that notices of the sales
mentioned were not given as prescribed by the statute and taking into
consideration that in connection with these sales the appellant Addison was
either the judgment creditor or else occupied a position analogous to that of
a judgment creditor, the sales must be held invalid.

The conveyance or reconveyance of the land from the Director of Lands is

equally invalid. The provisions of Act No. 1791 pertinent to the purchase or
repurchase of land confiscated for non-payment of taxes are found in
section 19 of the Act and read:

. . . In case such redemption be not made within the time above specified
the Government of the Philippine Islands shall have an absolute,
indefeasible title to said real property. Upon the expiration of the said ninety
days, if redemption be not made, the provincial treasurer shall immediately
notify the Director of Lands of the forfeiture and furnish him with a
description of the property, and said Director of Lands shall have full control
and custody thereof to lease or sell the same or any portion thereof in the
same manner as other public lands are leased or sold: Provided, That the
original owner, or his legal representative, shall have the right to
repurchase the entire amount of his said real property, at any time before a
sale or contract of sale has been made by the director of Lands to a third
party, by paying therefore the whole sum due thereon at the time of
ejectment together with a penalty of ten per centum . . . .

The appellant Addison repurchased under the final proviso of the section
quoted and was allowed to do so as the successor in interest of the original
owner under the execution sale above discussed. As we have seen, he
acquired no rights under these sales, was therefore not the successor of
the original owner and could only have obtained a valid conveyance of
such titles as the Government might have by following the procedure
prescribed by the Public Land Act for the sale of public lands. he is entitled
to reimbursement for the money paid for the redemption of the land, with
interest, but has acquired no title through the redemption.

The question of the priority of the record of the sheriff's sales over that of
the sale from Belisario to Borja is extensively argued in the briefs, but from
our point of view is of no importance; void sheriff's or execution sales
cannot be validated through inscription in the Mortgage Law registry.
The opposition of Adelina Ferrer must also be overruled. She maintained
that the land in question was community property of the marriage of Eulalio
Belisario and Paula Ira: that upon the death of Paula Ira inealed from is
modified, and the defendant Mr. Vicente Sotelo Matti, sentenced to accept
and receive from the plaintiff the tanks, the expellers and the motors in
question, and to pay the plaintiff the sum of ninety-six thousand pesos
(P96,000), with legal interest thereon from July 17, 1919, the date of the
filing of the complaint, until fully paid, and the costs of both instances. So
ordered.

Araullo, C.J., Johnson, Street, Malcolm, Avanceña, Villamor, Ostrand, and

Johns, JJ., concur.

—————————————————————————————————

Case 17. Chavez vs Gonzales 32 SCRA 547 (meron din 2008 nito <_<)

EN BANC

[G.R. No. L-27454. April 30, 1970.]

ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO

GONZALES, Defendant-Appellee.

Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.

Sulpicio E. Platon, for Defendant-Appellee.

SYLLABUS

1. CIVIL LAW; CONTRACTS; BREACH OF CONTRACT FOR NON-PERFORMANCE;

FIXING OF PERIOD BEFORE FILING OF COMPLAINT FOR NON-PERFORMANCE,
ACADEMIC.— Where the time for compliance had expired and there was breach of
contract by non-performance, it was academic for the plaintiff to have first
petitioned the court to fix a period for the performance of the contract before filing
his complaint.

2. ID.; ID.; ID.; DEFENDANT CANNOT INVOKE ARTICLE 1197 OF THE CIVIL CODE
OF THE PHILIPPINES.— Where the defendant virtually admitted non-performance of
the contract by returning the typewriter that he was obliged to repair in a non-
working condition, with essential parts missing, Article 1197 of the Civil Code of the
Philippines cannot be invoked. The fixing of a period would thus be a mere formality
and would serve no purpose than to delay.
3. ID.; ID.; ID.; DAMAGES RECOVERABLE; CASE AT BAR.— Where the defendant-
appellee contravened the tenor of his obligation because he not only did not repair
the typewriter but returned it "in shambles,’’ he is liable for the cost of the labor or
service expended in the repair of the typewriter, which is in the amount of P58.75,
because the obligation or contract was to repair it. In addition, he is likewise liable
under Art. 1170 of the Code, for the cost of the missing parts, in the amount of
P31.10, for in his obligation to repair the typewriter he was bound, but failed or
neglected, to return it in the same condition it was when he received it.

4. ID.; ID.; ID.; CLAIMS FOR DAMAGES OR ATTORNEY’S FEES NOT RECOVERABLE;
NOT ALLEGED OR PROVED IN INSTANT CASE.— Claims for damages and attorney’s
fees must be pleaded, and the existence of the actual basis thereof must be proved.
As no findings of fact were made on the claims for damages and attorney’s fees,
there is no factual basis upon which to make an award therefor.

5. REMEDIAL LAW; APPEALS; APPEAL FROM COURT OF FIRST INSTANCE TO

SUPREME COURT; ONLY QUESTIONS OF LAW REVIEWABLE.— Where the appellant
directly appeals from the decision of the trial court to the Supreme Court on
questions of law, he is bound by the judgment of the court a quo on its findings of
fact.

DECISION

REYES, J.B.L., J.:

This is a direct appeal by the party who prevailed in a suit for breach of oral
contract and recovery of damages but was unsatisfied with the decision rendered by
the Court of First Instance of Manila, in its Civil Case No. 65138, because it
awarded him only P31.10 out of his total claim of P690 00 for actual, temperate and
moral damages and attorney’s fees.

The appealed judgment, which is brief, is hereunder quoted in full: jgc:chanrobles.com.ph

"In the early part of July, 1963, the plaintiff delivered to the defendant, who is a
typewriter repairer, a portable typewriter for routine cleaning and servicing. The
defendant was not able to finish the job after some time despite repeated
reminders made by the plaintiff. The defendant merely gave assurances, but failed
to comply with the same. In October, 1963, the defendant asked from the plaintiff
the sum of P6.00 for the purchase of spare parts, which amount the plaintiff gave
to the defendant. On October 26, 1963, after getting exasperated with the delay of
the repair of the typewriter, the plaintiff went to the house of the defendant and
asked for the return of the typewriter. The defendant delivered the typewriter in a
wrapped package. On reaching home, the plaintiff examined the typewriter
returned to him by the defendant and found out that the same was in shambles,
with the interior cover and some parts and screws missing. On October 29, 1963.
the plaintiff sent a letter to the defendant formally demanding the return of the
missing parts, the interior cover and the sum of P6.00 (Exhibit D). The following
day, the defendant returned to the plaintiff some of the missing parts, the interior
cover and the P6.00.

"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business
Machines, and the repair job cost him a total of P89.85, including labor and
materials (Exhibit C).

"On August 23, 1965, the plaintiff commenced this action before the City Court of
Manila, demanding from the defendant the payment of P90.00 as actual and
compensatory damages, P100.00 for temperate damages, P500.00 for moral
damages, and P500.00 as attorney’s fees.

"In his answer as well as in his testimony given before this court, the defendant
made no denials of the facts narrated above, except the claim of the plaintiff that
the typewriter was delivered to the defendant through a certain Julio Bocalin, which
the defendant denied allegedly because the typewriter was delivered to him
personally by the plaintiff.

"The repair done on the typewriter by Freixas Business Machines with the total cost
of P89.85 should not, however, be fully chargeable against the defendant. The
repair invoice, Exhibit C, shows that the missing parts had a total value of only
P31.10.

"WHEREFORE, judgment is hereby rendered ordering the defendant to pay the

plaintiff the sum of P31.10, and the costs of suit.

"SO ORDERED." cralaw virtua1aw library

The error of the court a quo, according to the plaintiff-appellant, Rosendo O.

Chaves, is that it awarded only the value of the missing parts of the typewriter,
instead of the whole cost of labor and materials that went into the repair of the
machine, as provided for in Article 1167 of the Civil Code, reading as follows:jgc:chanrobles.com.ph

"ART. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore it may be decreed that what has been poorly done he
undone." cralaw virtua1aw library

On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is

that he is not liable at all, not even for the sum of P31.10, because his contract with
plaintiff-appellant did not contain a period, so that plaintiff-appellant should have
first filed a petition for the court to fix the period, under Article 1197 of the Civil
Code, within which the defendant appellee was to comply with the contract before
said defendant-appellee could be held liable for breach of contract.
Because the plaintiff appealed directly to the Supreme Court and the appellee did
not interpose any appeal, the facts, as found by the trial court, are now conclusive
and non-reviewable. 1

The appealed judgment states that the "plaintiff delivered to the defendant . . . a
portable typewriter for routine cleaning and servicing" ; that the defendant was not
able to finish the job after some time despite repeated reminders made by the
plaintiff" ; that the "defendant merely gave assurances, but failed to comply with
the same" ; and that "after getting exasperated with the delay of the repair of the
typewriter", the plaintiff went to the house of the defendant and asked for its
return, which was done. The inferences derivable from these findings of fact are
that the appellant and the appellee had a perfected contract for cleaning and
servicing a typewriter; that they intended that the defendant was to finish it at
some future time although such time was not specified; and that such time had
passed without the work having been accomplished, far the defendant returned the
typewriter cannibalized and unrepaired, which in itself is a breach of his obligation,
without demanding that he should be given more time to finish the job, or
compensation for the work he had already done. The time for compliance having
evidently expired, and there being a breach of contract by non-performance, it was
academic for the plaintiff to have first petitioned the court to fix a period for the
performance of the contract before filing his complaint in this case. Defendant
cannot invoke Article 1197 of the Civil Code for he virtually admitted non-
performance by returning the typewriter that he was obliged to repair in a non-
working condition, with essential parts missing. The fixing of a period would thus be
a mere formality and would serve no purpose than to delay (cf. Tiglao. Et. Al. V.
Manila Railroad Co. 98 Phil. 18l).

It is clear that the defendant-appellee contravened the tenor of his obligation

because he not only did not repair the typewriter but returned it "in shambles",
according to the appealed decision. For such contravention, as appellant contends,
he is liable under Article 1167 of the Civil Code. jam quot, for the cost of executing
the obligation in a proper manner. The cost of the execution of the obligation in this
case should be the cost of the labor or service expended in the repair of the
typewriter, which is in the amount of P58.75. because the obligation or contract was
to repair it.

In addition, the defendant-appellee is likewise liable, under Article 1170 of the

Code, for the cost of the missing parts, in the amount of P31.10, for in his
obligation to repair the typewriter he was bound, but failed or neglected, to return
it in the same condition it was when he received it.

Appellant’s claims for moral and temperate damages and attorney’s fees were,
however, correctly rejected by the trial court, for these were not alleged in his
complaint (Record on Appeal, pages 1-5). Claims for damages and attorney’s fees
must be pleaded, and the existence of the actual basis thereof must be proved. 2
The appealed judgment thus made no findings on these claims, nor on the fraud or
malice charged to the appellee. As no findings of fact were made on the claims for
damages and attorney’s fees, there is no factual basis upon which to make an
award therefor. Appellant is bound by such judgment of the court, a quo, by reason
of his having resorted directly to the Supreme Court on questions of law.

IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified,

by ordering the defendant-appellee to pay, as he is hereby ordered to pay, the
plaintiff-appellant the sum of P89.85, with interest at the legal rate from the filing
of the complaint. Costs in all instances against appellee Fructuoso Gonzales.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and

Villamor, JJ., concur.

Barredo, J., did not take part.

——————————————————————————————————————————

Case 18. Encarnacion vs Baldomar 77 Phil 470

EN BANC

G.R. No. L-264 October 4, 1946

VICENTE SINGSON ENCARNACION, plaintiff-appellee, 


vs.

JACINTA BALDOMAR, ET AL., defendants-appellants.

Bausa and Ampil for appellants.


Tolentino and Aguas for appellee.

HILADO, J.:

Vicente Singson Encarnacion, owner of the house numbered 589 Legarda

Street, Manila, some six years ago leased said house to Jacinto Baldomar
and her son, Lefrado Fernando, upon a month-to-month basis for the
monthly rental of P35. After Manila was liberated in the last war, specifically
on March 16, 1945, and on April 7, of the same year, plaintiff Singson
Encarnacion notified defendants, the said mother and son, to vacate the
house above-mentioned on or before April 15, 1945, because plaintiff
needed it for his offices as a result of the destruction of the building where
said plaintiff had said offices before. Despite this demand, defendants
insisted on continuing their occupancy. When the original action was
lodged with the Municipal Court of Manila on April 20, 1945, defendants
were in arrears in the payment of the rental corresponding to said month,
the agrees rental being payable within the first five days of each month.
That rental was paid prior to the hearing of the case in the municipal court,
as a consequence of which said court entered judgment for restitution and
payment of rentals at the rate of P35 a month from May 1, 1945, until
defendants completely vacate the premises. Although plaintiff included in
said original complaint a claim for P500 damages per month, that claim
was waived by him before the hearing in the municipal court, on account of
which nothing was said regarding said damages in the municipal court's
decision.

When the case reached the Court of First Instance of Manila upon appeal,
defendants filed therein a motion to dismiss (which was similar to a motion
to dismiss filed by them in the municipal court) based upon the ground that
the municipal court had no jurisdiction over the subject matter due to the
aforesaid claim for damages and that, therefore, the Court of First Instance
had no appellate jurisdiction over the subject matter of the action. That
motion to dismiss was denied by His Honor, Judge Mamerto Roxas, by
order dated July 21, 1945, on the ground that in the municipal court plaintiff
had waived said claim for damages and that, therefore, the same waiver
was understood also to have been made in the Court of First Instance. lawphil.net

In the Court of First Instance the graveman of the defense interposed by

defendants, as it was expressed defendant Lefrado Fernando during the
trial, was that the contract which they had celebrated with plaintiff since the
beginning authorized them to continue occupying the house indefinetly and
while they should faithfully fulfill their obligations as respects the payment
of the rentals, and that this agreement had been ratified when another
ejectment case between the parties filed during the Japanese regime
concerning the same house was allegedly compounded in the municipal
court. The Court of First Instance gave more credit to plaintiff's witness,
Vicente Singson Encarnacion, jr., who testified that the lease had always
and since the beginning been upon a month-to-month basis. The court
added in its decision that this defense which was put up by defendant's
answer, for which reason the Court considered it as indicative of an
eleventh-hour theory. We think that the Court of First Instance was right in
so declaring. Furthermore, carried to its logical conclusion, the defense
thus set up by defendant Lefrado Fernando would leave to the sole and
exclusive will of one of the contracting parties (defendants in this case) the
validity and fulfillment of the contract of lease, within the meaning of article
1256 of the Civil Code, since the continuance and fulfillment of the contract
would then depend solely and exclusively upon their free and uncontrolled
choice between continuing paying the rentals or not, completely depriving
the owner of all say in the matter. If this defense were to be allowed, so
long as defendants elected to continue the lease by continuing the payment
of the rentals, the owner would never be able to discontinue it; conversely,
although the owner should desire the lease to continue, the lessees could
effectively thwart his purpose if they should prefer to terminate the contract
by the simple expedient of stopping payment of the rentals. This, of course,
is prohibited by the aforesaid article of the Civil Code. (8 Manresa, 3d ed.,
pp. 626, 627; Cuyugan vs. Santos, 34 Phil., 100.)

During the pendency of the appeal in the Court of First Instance and before
the judgment appealed from was rendered on October 31, 1945, the rentals
in areas were those pertaining to the month of August, 1945, to the date of
said judgment at the rate of P35 a month. During the pendency of the
appeal in that court, certain deposits were made by defendants on account
of rentals with the clerk of said court, and in said judgment it is disposed
that the amounts thus deposited should be delivered to plaintiff.

Upon the whole, we are clearly of opinion that the judgment appealed from
should be, as it is hereby, affirmed, with the costs of the three instances to
appellants. So ordered.

Paras, Pablo, Perfecto and Padilla, JJ., concur.

—————————————————————————————————

Case 19. Eleizegui vs Lawn Tennis Club 2 Phil 309

EN BANC

G.R. No. 967 May 19, 1903

DARIO AND GAUDENCIO ELEIZEGUI, plaintiffs-appellees, 


vs.

THE MANILA LAWN TENNIS CLUB, defendant-appellant.

Pillsburry and Sutro for appellant.


Manuel Torres Vergara for appellee.
ARELLANO, C. J.:

This suit concerns the lease of a piece of land for a fixed consideration and
to endure at the will of the lessee. By the contract of lease the lessee is
expressly authorized to make improvements upon the land, by erecting
buildings of both permanent and temporary character, by making fills,
laying pipes, and making such other improvements as might be considered
desirable for the comfort and amusement of the members.

With respect to the term of the lease the present question has arisen. In its
decision three theories have been presented: One which makes the
duration depend upon the will of the lessor, who, upon one month's notice
given to the lessee, may terminate the lease so stipulated; another which,
on the contrary, makes it dependent upon the will of the lessee, as
stipulated; and the third, in accordance with which the right is reversed to
the courts to fix the duration of the term.

The first theory is that which has prevailed in the judgment below, as
appears from the language in which the basis of the decision is expressed:
"The court is of the opinion that the contract of lease was terminated by the
notice given by the plaintiff on August 28 of last year . . . ." And such is the
theory maintained by the plaintiffs, which expressly rests upon article 1581
of the Civil Code, the law which was in force at the time the contract was
entered into (January 25, 1890). The judge, in giving to this notice the
effect of terminating the lease, undoubtedly considers that it is governed by
the article relied upon by the plaintiffs, which is of the following tenor:
"When the term has not been fixed for the lease, it is understood to be for
years when an annual rental has been fixed, for months when the rent
is monthly. . . ." The second clause of the contract provides as follows:
"The rent of the said land is fixed at 25 pesos per month." (P. 11, Bill of
Exceptions.)

In accordance with such a theory, the plaintiffs might have terminated the
lease the month following the making of the contract — at any time after
the first month, which, strictly speaking, would be the only month with
respect to which they were expressly bound, they not being bound for each
successive month except by a tacit renewal (art. 1566) — an effect which
they might prevent by giving the required notice.

Although the relief asked for in the complaint, drawn in accordance with the
new form of procedure established by the prevailing Code, is the restitution
of the land to the plaintiffs (a formula common to various actions),
nevertheless the action which is maintained can be no other than that
of desahucio, in accordance with the substantive law governing the
contract. The lessor — says article 1569 of the Civil Code — may judicially
dispossess the lessee upon the expiration of the conventional term or of
the legal term; the conventional term — that is, the one agreed upon by the
parties; the legal term, in defect of the conventional, fixed for leases by
articles 1577 and 1581. We have already seen what this legal term is with
respect to urban properties, in accordance with article 1581.

Hence, it follows that the judge has only to determine whether there is or is
not conventional term. If there be a conventional term, he can not apply the
legal term fixed in subsidium to cover a case in which the parties have
made no agreement whatsoever with respect to the duration of the lease.
In this case the law interprets the presumptive intention of the parties, they
having said nothing in the contract with respect to its duration. "Obligations
arising from contracts have the force of law between the contracting parties
and must be complied with according to the tenor of the contracts." (Art.
1091 of the Civil Code.)

The obligations which, with the force of law, the lessors assumed by the
contract entered into, so far as pertaining to the issues, are the following:
"First. . . . They lease the above-described land to Mr. Williamson, who
takes it on lease, . . . for all the time the members of the said club may
desire to use it . . . Third. . . . the owners of the land undertake to maintain
the club as tenant as long as the latter shall see fit, without altering in the
slightest degree the conditions of this contract, even though the estate be
sold."

It is necessary, therefore, to answer the first question: Was there, or was

there not, a conventional term, a duration, agreed upon in the contract in
question? If there was an agreed duration, a conventional term, then the
legal term — the term fixed in article 1581 — has no application; the
contract is the supreme law of the contracting parties. Over and above the
general law is the special law, expressly imposed upon themselves by the
contracting parties. Without these clauses 1 and 3, the contract would
contain no stipulation with respect to the duration of the lease, and then
article 1581, in connection with article 1569, would necessarily be
applicable. In view of these clauses, however, it can not be said that there
is no stipulation with respect to the duration of the lease, or that,
notwithstanding these clauses, article 1581, in connection with article 1569,
can be applied. If this were so, it would be necessary to hold that the
lessors spoke in vain — that their words are to be disregarded — a claim
which can not be advanced by the plaintiffs nor upheld by any court without
citing the law which detracts all legal force from such words or despoils
them of their literal sense.

It having been demonstrated that the legal term can not be applied, there
being a conventional term, this destroys the assumption that the contract of
lease was wholly terminated by the notice given by the plaintiffs, this notice
being necessary only when it becomes necessary to have recourse to the
legal term. Nor had the plaintiffs, under the contract, any right to give such
notice. It is evident that they had no intention of stipulating that they
reserved the right to give such notice. Clause 3 begins as follows: "Mr.
Williamson, or whoever may succeed him as secretary of said club, may
terminate this lease whenever desired without other formality than that of
giving a month's notice. The owners of the land undertake to maintain the
club as tenant as long as the latter shall see fit." The right of the one and
the obligation of the others being thus placed in antithesis, there is
something more, much more, than the inclusio unius, exclusio alterius. It is
evident that the lessors did not intend to reserve to themselves the right to
rescind that which they expressly conferred upon the lessee by establishing
it exclusively in favor of the latter.

It would be the greatest absurdity to conclude that in a contract by which

the lessor has left the termination of the lease to the will of the lessee, such
a lease can or should be terminated at the will of the lessor.

It would appear to follow, from the foregoing, that, if such is the force of the
agreement, there can be no other mode of terminating the lease than by
the will of the lessee, as stipulated in this case. Such is the conclusion
maintained by the defendant in the demonstration of the first error of law in
the judgment, as alleged by him. He goes so far, under this theory, as to
maintain the possibility of a perpetual lease, either as such lease, if the
name can be applied, or else as an innominate contract, or under any other
denomination, in accordance with the agreement of the parties, which is, in
fine, the law of the contract, superior to all other law, provided that there be
no agreement against any prohibitive statute, morals, or public policy.

It is unnecessary here to enter into a discussion of a perpetual lease in

accordance with the law and doctrine prior to the Civil Code now in force,
and which has been operative since 1889. Hence the judgment of the
supreme court of Spain of January 2, 1891, with respect to a lease made in
1887, cited by the defendant, and a decision stated by him to have been
rendered by the Audiencia of Pamplona in 1885 (it appears to be rather a
decision by the head office of land registration of July 1, 1885), and any
other decision which might be cited based upon the constitutions of
Cataluna, according to which a lease of more than ten years is understood
to create a life tenancy, or even a perpetual tenancy, are entirely out of
point in this case, in which the subject-matter is a lease entered into under
the provisions of the present Civil Code, in accordance with the principles
of which alone can this doctrine be examined.

It is not to be understood that we admit that the lease entered into was
stipulated as a life tenancy, and still less as a perpetual lease. The terms of
the contract express nothing to this effect. They do, whatever, imply this
idea. If the lease could last during such time as the lessee might see fit,
because it has been so stipulated by the lessor, it would last, first, as long
as the will of the lessee — that is, all his life; second, during all the time that
he may have succession, inasmuch as he who contracts does so for
himself and his heirs. (Art. 1257 of the Civil Code.) The lease in question
does not fall within any of the cases in which the rights and obligations
arising from a contract can not be transmitted to heirs, either by its nature,
by agreement, or by provision of law. Furthermore, the lessee is an English
association.

Usufruct is a right of superior degree to that which arises from a lease. It is

a real right and includes all the jus utendi and jus fruendi. Nevertheless, the
utmost period for which a usufruct can endure, if constituted in favor a
natural person, is the lifetime of the usufructuary (art. 513, sec. 1); and if in
favor of juridical person, it can not be created for more than thirty years.
(Art. 515.) If the lease might be perpetual, in what would it be distinguished
from an emphyteusis? Why should the lessee have a greater right than the
usufructuary, as great as that of an emphyteuta, with respect to the
duration of the enjoyment of the property of another? Why did they not
contract for a usufruct or an emphyteusis? It was repeatedly stated in the
document that it was a lease, and nothing but a lease, which was agreed
upon: "Being in the full enjoyment of the necessary legal capacity to enter
into this contract of lease . . . they have agreed upon the lease of said
estate . . . They lease to Mr. Williamson, who receives it as such. . . .
The rental is fixed at 25 pesos a month. . . . The owners bind themselves to
maintain the club as tenant. . . . Upon the foregoing conditions they make
the present contract of lease. . . ." (Pp. 9, 11, and 12, bill of exceptions.) If it
is a lease, then it must be for a determinate period. (Art. 1543.) By its very
nature it must be temporary, just as by reason of its nature an emphyteusis
must be perpetual, or for an unlimited period. (Art. 1608.)

On the other hand, it can not be concluded that the termination of the
contract is to be left completely at the will of the lessee, because it has
been stipulated that its duration is to be left to his will.

The Civil Code has made provision for such a case in all kinds of
obligations. In speaking in general of obligations with a term it has supplied
the deficiency of the former law with respect to the "duration of the term
when it has been left to the will of the debtor," and provides that in this case
the term shall be fixed by the courts. (Art. 1128, sec. 2.) In every contract,
as laid down by the authorities, there is always a creditor who is entitled to
demand the performance, and a debtor upon whom rests the obligation to
perform the undertaking. In bilateral contracts the contracting parties are
mutually creditors and debtors. Thus, in this contract of lease, the lessee is
the creditor with respect to the rights enumerated in article 1554, and is the
debtor with respect to the obligations imposed by articles 1555 and 1561.
The term within which performance of the latter obligation is due is what
has been left to the will of the debtor. This term it is which must be fixed by
the courts.

The only action which can be maintained under the terms of the contract is
that by which it is sought to obtain from the judge the determination of this
period, and not the unlawful detainer action which has been brought — an
action which presupposes the expiration of the term and makes it the duty
of the judge to simply decree an eviction. To maintain the latter action it is
sufficient to show the expiration of the term of the contract, whether
conventional or legal; in order to decree the relief to be granted in the
former action it is necessary for the judge to look into the character and
conditions of the mutual undertakings with a view to supplying the lacking
element of a time at which the lease is to expire. In the case of a loan of
money or a commodatum of furniture, the payment or return to be made
when the borrower "can conveniently do so" does not mean that he is to be
allowed to enjoy the money or to make use of the thing indefinitely or
perpetually. The courts will fix in each case, according to the
circumstances, the time for the payment or return. This is the theory also
maintained by the defendant in his demonstration of the fifth assignment of
error. "Under article 1128 of the Civil Code," thus his proposition concludes,
"contracts whose term is left to the will of one of the contracting parties
must be fixed by the courts, . . . the conditions as to the term of this lease
has a direct legislative sanction," and he cites articles 1128. "In place of the
ruthless method of annihilating a solemn obligation, which the plaintiffs in
this case have sought to pursue, the Code has provided a legitimate and
easily available remedy. . . . The Code has provided for the proper
disposition of those covenants, and a case can hardly arise more clearly
demonstrating the usefulness of that provision than the case at bar." (Pp.
52 and 53 of appellant's brief.)

The plaintiffs, with respect to this conclusion on the part of their opponents,
only say that article 1128 "expressly refers to obligations in contracts in
general, and that it is well known that a lease is included among special
contracts." But they do not observe that if contracts, simply because special
rules are provided for them, could be excepted from the provisions of the
articles of the Code relative to obligations and contracts in general, such
general provisions would be wholly without application. The system of the
Code is that of establishing general rules applicable to all obligations and
contracts, and then special provisions peculiar to each species of contract.
In no part of Title VI of Book IV, which treats of the contract of lease, are
there any special rules concerning pure of conditional obligations which
may be stipulated in a lease, because, with respect to these matters, the
provisions of section 1, chapter 3, Title I, on the subject of obligations are
wholly sufficient. With equal reason should we refer to section 2, which
deals with obligations with a term, in the same chapter and title, if a
question concerning the term arises out of a contract of lease, as in the
present case, and within this section we find article 1128, which decides the
question.

The judgment was entered below upon the theory of the expiration of a
legal term which does not exist, as the case requires that a term be fixed by
the courts under the provisions of article 1128 with respect to obligations
which, as is the present, are terminable at the will of the obligee. It follows,
therefore, that the judgment below is erroneous.

The judgment is reversed and the case will be remanded to the court below
with directions to enter a judgment of dismissal of the action in favor of the
defendant, the Manila Lawn Tennis Club, without special allowance as to
the recovery of costs. So ordered.

Mapa and Ladd, JJ., concur.


Torres, J., disqualified.

Separate Opinions

WILLARD, J., concurring:

I concur in the foregoing opinion so far as it holds that article 1581 has no
application to the case and that the action can not be maintained. But as to
the application of article 1128 I do not concur. That article is as follows:

Should the obligation not fix a period, but it can be inferred from its nature
and circumstances that there was an intention to grant it to the debtor, the
courts shall fix the duration of the same.

The court shall also fix the duration of the period when it may have been
left to the will of the debtor.

The court has applied the last paragraph of the article to the case of a
lease. But, applying the first paragraph to leases, we have a direct conflict
between this article and article 1581. Let us suppose the lease of a house
for 50 pesos a month. Nothing is said about the number of months during
which the lessee shall occupy it. If article 1581 is applicable to this case,
the law fixes the duration of the term and the courts have no power to
change it. If article 1128 is applied to it, the courts fix the duration of the
lease without reference to article 1581. It will, I think, be agreed by
everyone that article 1581 is the law applicable to the case, and that article
1128 has nothing to do with it.

It seems clear that both parts of the article must refer to the same kind of
obligations. The first paragraph relates to obligations in which the parties
have named no period, the second to the same kind of obligations in which
the period is left to the will of the debtor. If the first paragraph is not
applicable to leases, the second is not.

The whole article was, I think, intended to apply generally to unilateral

contracts — to those in which the creditor had parted with something of
value, leaving it to the debtor to say when it should be returned. In such
cases the debtor might never return it, and the creditor might thus be
deprived of his property and entirely defeated in his rights. It was to prevent
such a wrong that the article was adopted. But it has no application to this
case. The plaintiffs are not deprived of their rights. They get every month
the value which they themselves put upon the use of the property. The time
of the payment of this rent has not been left by the contract to the will of the
debtor. It is expressly provided in the contract that it shall be paid "within
the first five days after the expiration of each month."

Article 1255 of the Civil Code is as follows:

The contracting parties may make the agreement and establish the clauses
and conditions which they may deem advisable, provided they are not in
contravention of law, morals, or public order.

That the parties to this contract distinctly agreed that the defendant should
have this property so long as he was willing to pay 25 pesos a month for it,
is undisputed.

I find nothing in the Code to show that when a natural person is the tenant
such an agreement would be contrary to law, morality, or public policy. In
such a case the contract would terminate at the death of the tenant. Such is
the doctrine of the French Cour de Cassation. (Houet vs. Lamarge, July 20,
1840.)

The tenant is the only person who has been given the right to say how long
the contract shall continue. That right is personal to him, and is not property
in such a sense as to pass to his heirs.

In this case the question is made more difficult by the fact that the tenant is
said to be juridical person, and it is said that the lease is therefore a
perpetual one. Just what kind of a partnership or association the defendant
is does not appear, and without knowing what kind of an entity it is we can
not say that this contract is a perpetual lease. Even if the defendant has
perpetual succession, the lease would not necessarily last forever. A
breach of any one of the obligations imposed upon the lessee by article
1555 of the Civil Code would give the landlord the right to terminate it.

—————————————————————————————————
Case 20. Philbanking vs Lui She 21 SCRA 53

EN BANC

G.R. No. L-17587 September 12, 1967

PHILIPPINE BANKING CORPORATION, representing the estate of

JUSTINA SANTOS Y CANON FAUSTINO, deceased, plaintiff-appellant, 

vs.

LUI SHE in her own behalf and as administratrix of the intestate estate
of Wong Heng, deceased, defendant-appellant.

Nicanor S. Sison for plaintiff-appellant.


Ozaeta, Gibbs & Ozaeta for defendant-appellant.

CASTRO, J.:

Justina Santos y Canon Faustino and her sister Lorenzo were the owners
in common of a piece of land in Manila. This parcel, with an area of
2,582.30 square meters, is located on Rizal Avenue and opens into
Florentino Torres street at the back and Katubusan street on one side. In it
are two residential houses with entrance on Florentino Torres street and the
Hen Wah Restaurant with entrance on Rizal Avenue. The sisters lived in
one of the houses, while Wong Heng, a Chinese, lived with his family in the
restaurant. Wong had been a long-time lessee of a portion of the property,
paying a monthly rental of P2,620.

On September 22, 1957 Justina Santos became the owner of the entire
property as her sister died with no other heir. Then already well advanced
in years, being at the time 90 years old, blind, crippled and an invalid, she
was left with no other relative to live with. Her only companions in the
house were her 17 dogs and 8 maids. Her otherwise dreary existence was
brightened now and then by the visits of Wong's four children who had
become the joy of her life. Wong himself was the trusted man to whom she
delivered various amounts for safekeeping, including rentals from her
property at the corner of Ongpin and Salazar streets and the rentals which
Wong himself paid as lessee of a part of the Rizal Avenue property. Wong
also took care of the payment; in her behalf, of taxes, lawyers' fees, funeral
expenses, masses, salaries of maids and security guard, and her
household expenses.
"In grateful acknowledgment of the personal services of the lessee to her,"
Justina Santos executed on November 15, 1957 a contract of lease (Plff
Exh. 3) in favor of Wong, covering the portion then already leased to him
and another portion fronting Florentino Torres street. The lease was for 50
years, although the lessee was given the right to withdraw at any time from
the agreement; the monthly rental was P3,120. The contract covered an
area of 1,124 square meters. Ten days later (November 25), the contract
was amended (Plff Exh. 4) so as to make it cover the entire property,
including the portion on which the house of Justina Santos stood, at an
additional monthly rental of P360. For his part Wong undertook to pay, out
of the rental due from him, an amount not exceeding P1,000 a month for
the food of her dogs and the salaries of her maids.

On December 21 she executed another contract (Plff Exh. 7) giving Wong

the option to buy the leased premises for P120,000, payable within ten
years at a monthly installment of P1,000. The option, written in Tagalog,
imposed on him the obligation to pay for the food of the dogs and the
salaries of the maids in her household, the charge not to exceed P1,800 a
month. The option was conditioned on his obtaining Philippine citizenship,
a petition for which was then pending in the Court of First Instance of Rizal.
It appears, however, that this application for naturalization was withdrawn
when it was discovered that he was not a resident of Rizal. On October 28,
1958 she filed a petition to adopt him and his children on the erroneous
belief that adoption would confer on them Philippine citizenship. The error
was discovered and the proceedings were abandoned.

On November 18, 1958 she executed two other contracts, one (Plff Exh. 5)
extending the term of the lease to 99 years, and another (Plff Exh. 6) fixing
the term of the option of 50 years. Both contracts are written in Tagalog.

In two wills executed on August 24 and 29, 1959 (Def Exhs. 285 & 279),
she bade her legatees to respect the contracts she had entered into with
Wong, but in a codicil (Plff Exh. 17) of a later date (November 4, 1959) she
appears to have a change of heart. Claiming that the various contracts
were made by her because of machinations and inducements practiced by
him, she now directed her executor to secure the annulment of the
contracts.

On November 18 the present action was filed in the Court of First Instance
of Manila. The complaint alleged that the contracts were obtained by Wong
"through fraud, misrepresentation, inequitable conduct, undue influence
and abuse of confidence and trust of and (by) taking advantage of the
helplessness of the plaintiff and were made to circumvent the constitutional
provision prohibiting aliens from acquiring lands in the Philippines and also
of the Philippine Naturalization Laws." The court was asked to direct the
Register of Deeds of Manila to cancel the registration of the contracts and
to order Wong to pay Justina Santos the additional rent of P3,120 a month
from November 15, 1957 on the allegation that the reasonable rental of the
leased premises was P6,240 a month.

In his answer, Wong admitted that he enjoyed her trust and confidence as
proof of which he volunteered the information that, in addition to the sum of
P3,000 which he said she had delivered to him for safekeeping, another
sum of P22,000 had been deposited in a joint account which he had with
one of her maids. But he denied having taken advantage of her trust in
order to secure the execution of the contracts in question. As counterclaim
he sought the recovery of P9,210.49 which he said she owed him for
advances.

Wong's admission of the receipt of P22,000 and P3,000 was the cue for the
filing of an amended complaint. Thus on June 9, 1960, aside from the
nullity of the contracts, the collection of various amounts allegedly delivered
on different occasions was sought. These amounts and the dates of their
delivery are P33,724.27 (Nov. 4, 1957); P7,344.42 (Dec. 1, 1957); P10,000
(Dec. 6, 1957); P22,000 and P3,000 (as admitted in his answer). An
accounting of the rentals from the Ongpin and Rizal Avenue properties was
also demanded.

In the meantime as a result of a petition for guardianship filed in the

Juvenile and Domestic Relations Court, the Security Bank & Trust Co. was
appointed guardian of the properties of Justina Santos, while Ephraim G.
Gochangco was appointed guardian of her person.

In his answer, Wong insisted that the various contracts were freely and
voluntarily entered into by the parties. He likewise disclaimed knowledge of
the sum of P33,724.27, admitted receipt of P7,344.42 and P10,000, but
contended that these amounts had been spent in accordance with the
instructions of Justina Santos; he expressed readiness to comply with any
order that the court might make with respect to the sums of P22,000 in the
bank and P3,000 in his possession.
The case was heard, after which the lower court rendered judgment as
follows:

[A]ll the documents mentioned in the first cause of action, with the
exception of the first which is the lease contract of 15 November 1957, are
declared null and void; Wong Heng is condemned to pay unto plaintiff thru
guardian of her property the sum of P55,554.25 with legal interest from the
date of the filing of the amended complaint; he is also ordered to pay the
sum of P3,120.00 for every month of his occupation as lessee under the
document of lease herein sustained, from 15 November 1959, and the
moneys he has consigned since then shall be imputed to that; costs
against Wong Heng.

From this judgment both parties appealed directly to this Court. After the
case was submitted for decision, both parties died, Wong Heng on October
21, 1962 and Justina Santos on December 28, 1964. Wong was
substituted by his wife, Lui She, the other defendant in this case, while
Justina Santos was substituted by the Philippine Banking Corporation.

Justina Santos maintained — now reiterated by the Philippine Banking

Corporation — that the lease contract (Plff Exh. 3) should have been
annulled along with the four other contracts (Plff Exhs. 4-7) because it lacks
mutuality; because it included a portion which, at the time, was in custodia
legis; because the contract was obtained in violation of the fiduciary
relations of the parties; because her consent was obtained through undue
influence, fraud and misrepresentation; and because the lease contract,
like the rest of the contracts, is absolutely simulated.

Paragraph 5 of the lease contract states that "The lessee may at any time
withdraw from this agreement." It is claimed that this stipulation offends
article 1308 of the Civil Code which provides that "the contract must bind
both contracting parties; its validity or compliance cannot be left to the will
of one of them."

We have had occasion to delineate the scope and application of article

1308 in the early case of Taylor v. Uy Tieng Piao.1 We said in that case:

Article 1256 [now art. 1308] of the Civil Code in our opinion creates no
impediment to the insertion in a contract for personal service of a resolutory
condition permitting the cancellation of the contract by one of the parties.
Such a stipulation, as can be readily seen, does not make either the validity
or the fulfillment of the contract dependent upon the will of the party to
whom is conceded the privilege of cancellation; for where the contracting
parties have agreed that such option shall exist, the exercise of the option
is as much in the fulfillment of the contract as any other act which may
have been the subject of agreement. Indeed, the cancellation of a contract
in accordance with conditions agreed upon beforehand is fulfillment.2

And so it was held in Melencio v. Dy Tiao Lay 3 that a "provision in a lease

contract that the lessee, at any time before he erected any building on the
land, might rescind the lease, can hardly be regarded as a violation of
article 1256 [now art. 1308] of the Civil Code."

The case of Singson Encarnacion v. Baldomar 4 cannot be cited in support

of the claim of want of mutuality, because of a difference in factual setting.
In that case, the lessees argued that they could occupy the premises as
long as they paid the rent. This is of course untenable, for as this Court
said, "If this defense were to be allowed, so long as defendants elected to
continue the lease by continuing the payment of the rentals, the owner
would never be able to discontinue it; conversely, although the owner
should desire the lease to continue the lessees could effectively thwart his
purpose if they should prefer to terminate the contract by the simple
expedient of stopping payment of the rentals." Here, in contrast, the right of
the lessee to continue the lease or to terminate it is so circumscribed by the
term of the contract that it cannot be said that the continuance of the lease
depends upon his will. At any rate, even if no term had been fixed in the
agreement, this case would at most justify the fixing of a period5 but not the
annulment of the contract.

Nor is there merit in the claim that as the portion of the property formerly
owned by the sister of Justina Santos was still in the process of settlement
in the probate court at the time it was leased, the lease is invalid as to such
portion. Justina Santos became the owner of the entire property upon the
death of her sister Lorenzo on September 22, 1957 by force of article 777
of the Civil Code. Hence, when she leased the property on November 15,
she did so already as owner thereof. As this Court explained in upholding
the sale made by an heir of a property under judicial administration:

That the land could not ordinarily be levied upon while in custodia
legis does not mean that one of the heirs may not sell the right, interest or
participation which he has or might have in the lands under administration.
The ordinary execution of property in custodia legis is prohibited in order to
avoid interference with the possession by the court. But the sale made by
an heir of his share in an inheritance, subject to the result of the pending
administration, in no wise stands in the way of such administration.6

It is next contended that the lease contract was obtained by Wong in

violation of his fiduciary relationship with Justina Santos, contrary to article
1646, in relation to article 1941 of the Civil Code, which disqualifies "agents
(from leasing) the property whose administration or sale may have been
entrusted to them." But Wong was never an agent of Justina Santos. The
relationship of the parties, although admittedly close and confidential, did
not amount to an agency so as to bring the case within the prohibition of
the law.

Just the same, it is argued that Wong so completely dominated her life and
affairs that the contracts express not her will but only his. Counsel for
Justina Santos cites the testimony of Atty. Tomas S. Yumol who said that he
prepared the lease contract on the basis of data given to him by Wong and
that she told him that "whatever Mr. Wong wants must be followed."7

The testimony of Atty. Yumol cannot be read out of context in order to

warrant a finding that Wong practically dictated the terms of the contract.
What this witness said was:

Q Did you explain carefully to your client, Doña Justina, the contents of this
document before she signed it?

A I explained to her each and every one of these conditions and I also told
her these conditions were quite onerous for her, I don't really know if I have
expressed my opinion, but I told her that we would rather not execute any
contract anymore, but to hold it as it was before, on a verbal month to
month contract of lease.

Q But, she did not follow your advice, and she went with the contract just
the same?

A She agreed first . . .

Q Agreed what?
A Agreed with my objectives that it is really onerous and that I was really
right, but after that, I was called again by her and she told me to follow the
wishes of Mr. Wong Heng.

xxx xxx xxx

Q So, as far as consent is concerned, you were satisfied that this document
was perfectly proper?

xxx xxx xxx

A Your Honor, if I have to express my personal opinion, I would say she is

not, because, as I said before, she told me — "Whatever Mr. Wong wants
must be followed."8

Wong might indeed have supplied the data which Atty. Yumol embodied in
the lease contract, but to say this is not to detract from the binding force of
the contract. For the contract was fully explained to Justina Santos by her
own lawyer. One incident, related by the same witness, makes clear that
she voluntarily consented to the lease contract. This witness said that the
original term fixed for the lease was 99 years but that as he doubted the
validity of a lease to an alien for that length of time, he tried to persuade her
to enter instead into a lease on a month-to-month basis. She was, however,
firm and unyielding. Instead of heeding the advice of the lawyer, she
ordered him, "Just follow Mr. Wong Heng."9 Recounting the incident, Atty.
Yumol declared on cross examination:

Considering her age, ninety (90) years old at the time and her condition,
she is a wealthy woman, it is just natural when she said "This is what I want
and this will be done." In particular reference to this contract of lease, when
I said "This is not proper," she said — "You just go ahead, you prepare that,
I am the owner, and if there is any illegality, I am the only one that can
question the illegality."10

Atty. Yumol further testified that she signed the lease contract in the
presence of her close friend, Hermenegilda Lao, and her maid, Natividad
Luna, who was constantly by her side.11 Any of them could have testified on
the undue influence that Wong supposedly wielded over Justina Santos,
but neither of them was presented as a witness. The truth is that even after
giving his client time to think the matter over, the lawyer could not make her
change her mind. This persuaded the lower court to uphold the validity of
the lease contract against the claim that it was procured through undue
influence.

Indeed, the charge of undue influence in this case rests on a mere

inference12 drawn from the fact that Justina Santos could not read (as she
was blind) and did not understand the English language in which the
contract is written, but that inference has been overcome by her own
evidence.

Nor is there merit in the claim that her consent to the lease contract, as well
as to the rest of the contracts in question, was given out of a mistaken
sense of gratitude to Wong who, she was made to believe, had saved her
and her sister from a fire that destroyed their house during the liberation of
Manila. For while a witness claimed that the sisters were saved by other
persons (the brothers Edilberto and Mariano Sta. Ana)13 it was Justina
Santos herself who, according to her own witness, Benjamin C. Alonzo,
said "very emphatically" that she and her sister would have perished in the
fire had it not been for Wong.14 Hence the recital in the deed of conditional
option (Plff Exh. 7) that "[I]tong si Wong Heng ang siyang nagligtas sa
aming dalawang magkapatid sa halos ay tiyak na kamatayan", and the
equally emphatic avowal of gratitude in the lease contract (Plff Exh. 3).

As it was with the lease contract (Plff Exh. 3), so it was with the rest of the
contracts (Plff Exhs. 4-7) — the consent of Justina Santos was given freely
and voluntarily. As Atty. Alonzo, testifying for her, said:

[I]n nearly all documents, it was either Mr. Wong Heng or Judge Torres and/
or both. When we had conferences, they used to tell me what the
documents should contain. But, as I said, I would always ask the old
woman about them and invariably the old woman used to tell me: "That's
okay. It's all right."15

But the lower court set aside all the contracts, with the exception of the
lease contract of November 15, 1957, on the ground that they are contrary
to the expressed wish of Justina Santos and that their considerations are
fictitious. Wong stated in his deposition that he did not pay P360 a month
for the additional premises leased to him, because she did not want him to,
but the trial court did not believe him. Neither did it believe his statement
that he paid P1,000 as consideration for each of the contracts (namely, the
option to buy the leased premises, the extension of the lease to 99 years,
and the fixing of the term of the option at 50 years), but that the amount
was returned to him by her for safekeeping. Instead, the court relied on the
testimony of Atty. Alonzo in reaching the conclusion that the contracts are
void for want of consideration.

Atty. Alonzo declared that he saw no money paid at the time of the
execution of the documents, but his negative testimony does not rule out
the possibility that the considerations were paid at some other time as the
contracts in fact recite. What is more, the consideration need not pass from
one party to the other at the time a contract is executed because the
promise of one is the consideration for the other.16

With respect to the lower court's finding that in all probability Justina Santos
could not have intended to part with her property while she was alive nor
even to lease it in its entirety as her house was built on it, suffice it to quote
the testimony of her own witness and lawyer who prepared the contracts
(Plff Exhs. 4-7) in question, Atty. Alonzo:

The ambition of the old woman, before her death, according to her
revelation to me, was to see to it that these properties be enjoyed, even to
own them, by Wong Heng because Doña Justina told me that she did not
have any relatives, near or far, and she considered Wong Heng as a son
and his children her grandchildren; especially her consolation in life was
when she would hear the children reciting prayers in Tagalog.17

She was very emphatic in the care of the seventeen (17) dogs and of the
maids who helped her much, and she told me to see to it that no one could
disturb Wong Heng from those properties. That is why we thought of the
ninety-nine (99) years lease; we thought of adoption, believing that thru
adoption Wong Heng might acquire Filipino citizenship; being the adopted
child of a Filipino citizen.18

This is not to say, however, that the contracts (Plff Exhs. 3-7) are valid. For
the testimony just quoted, while dispelling doubt as to the intention of
Justina Santos, at the same time gives the clue to what we view as a
scheme to circumvent the Constitutional prohibition against the transfer of
lands to aliens. "The illicit purpose then becomes the
illegal causa"19 rendering the contracts void.

Taken singly, the contracts show nothing that is necessarily illegal, but
considered collectively, they reveal an insidious pattern to subvert by
indirection what the Constitution directly prohibits. To be sure, a lease to an
alien for a reasonable period is valid. So is an option giving an alien the
right to buy real property on condition that he is granted Philippine
citizenship. As this Court said in Krivenko v. Register of Deeds:20

[A]liens are not completely excluded by the Constitution from the use of
lands for residential purposes. Since their residence in the Philippines is
temporary, they may be granted temporary rights such as a lease contract
which is not forbidden by the Constitution. Should they desire to remain
here forever and share our fortunes and misfortunes, Filipino citizenship is
not impossible to acquire.

But if an alien is given not only a lease of, but also an option to buy, a piece
of land, by virtue of which the Filipino owner cannot sell or otherwise
dispose of his property,21 this to last for 50 years, then it becomes clear that
the arrangement is a virtual transfer of ownership whereby the owner
divests himself in stages not only of the right to enjoy the land ( jus
possidendi, jus utendi, jus fruendi and jus abutendi) but also of the right to
dispose of it ( jus disponendi) — rights the sum total of which make up
ownership. It is just as if today the possession is transferred, tomorrow, the
use, the next day, the disposition, and so on, until ultimately all the rights of
which ownership is made up are consolidated in an alien. And yet this is
just exactly what the parties in this case did within the space of one year,
with the result that Justina Santos' ownership of her property was reduced
to a hollow concept. If this can be done, then the Constitutional ban against
alien landholding in the Philippines, as announced in Krivenko v. Register
of Deeds,22 is indeed in grave peril.

It does not follow from what has been said, however, that because the
parties are in pari delicto they will be left where they are, without relief. For
one thing, the original parties who were guilty of a violation of the
fundamental charter have died and have since been substituted by their
administrators to whom it would be unjust to impute their guilt.23 For
another thing, and this is not only cogent but also important, article 1416 of
the Civil Code provides, as an exception to the rule on pari delicto, that
"When the agreement is not illegal per se but is merely prohibited, and the
prohibition by law is designed for the protection of the plaintiff, he may, if
public policy is thereby enhanced, recover what he has paid or delivered."
The Constitutional provision that "Save in cases of hereditary succession,
no private agricultural land shall be transferred or assigned except to
individuals, corporations, or associations qualified to acquire or hold lands
of the public domain in the Philippines"24 is an expression of public policy to
conserve lands for the Filipinos. As this Court said in Krivenko:

It is well to note at this juncture that in the present case we have no choice.
We are construing the Constitution as it is and not as we may desire it to
be. Perhaps the effect of our construction is to preclude aliens admitted
freely into the Philippines from owning sites where they may build their
homes. But if this is the solemn mandate of the Constitution, we will not
attempt to compromise it even in the name of amity or equity . . . .

For all the foregoing, we hold that under the Constitution aliens may not
acquire private or public agricultural lands, including residential lands, and,
accordingly, judgment is affirmed, without costs.25

That policy would be defeated and its continued violation sanctioned if,
instead of setting the contracts aside and ordering the restoration of the
land to the estate of the deceased Justina Santos, this Court should apply
the general rule of pari delicto. To the extent that our ruling in this case
conflicts with that laid down in Rellosa v. Gaw Chee Hun 26 and subsequent
similar cases, the latter must be considered as pro tanto qualified.

The claim for increased rentals and attorney's fees, made in behalf of
Justina Santos, must be denied for lack of merit.

And what of the various amounts which Wong received in trust from her? It
appears that he kept two classes of accounts, one pertaining to amount
which she entrusted to him from time to time, and another pertaining to
rentals from the Ongpin property and from the Rizal Avenue property, which
he himself was leasing.

With respect to the first account, the evidence shows that he received
P33,724.27 on November 8, 1957 (Plff Exh. 16); P7,354.42 on December
1, 1957 (Plff Exh. 13); P10,000 on December 6, 1957 (Plff Exh. 14) ; and
P18,928.50 on August 26, 1959 (Def. Exh. 246), or a total of P70,007.19.
He claims, however, that he settled his accounts and that the last amount
of P18,928.50 was in fact payment to him of what in the liquidation was
found to be due to him.

He made disbursements from this account to discharge Justina Santos'

obligations for taxes, attorneys' fees, funeral services and security guard
services, but the checks (Def Exhs. 247-278) drawn by him for this purpose
amount to only P38,442.84.27 Besides, if he had really settled his accounts
with her on August 26, 1959, we cannot understand why he still had
P22,000 in the bank and P3,000 in his possession, or a total of P25,000. In
his answer, he offered to pay this amount if the court so directed him. On
these two grounds, therefore, his claim of liquidation and settlement of
accounts must be rejected.

After subtracting P38,442.84 (expenditures) from P70,007.19 (receipts),

there is a difference of P31,564 which, added to the amount of P25,000,
leaves a balance of P56,564.3528 in favor of Justina Santos.

As to the second account, the evidence shows that the monthly income
from the Ongpin property until its sale in Rizal Avenue July, 1959 was
P1,000, and that from the Rizal Avenue property, of which Wong was the
lessee, was P3,120. Against this account the household expenses and
disbursements for the care of the 17 dogs and the salaries of the 8 maids
of Justina Santos were charged. This account is contained in a notebook
(Def. Exh. 6) which shows a balance of P9,210.49 in favor of Wong. But it
is claimed that the rental from both the Ongpin and Rizal Avenue properties
was more than enough to pay for her monthly expenses and that, as a
matter of fact, there should be a balance in her favor. The lower court did
not allow either party to recover against the other. Said the court:

[T]he documents bear the earmarks of genuineness; the trouble is that they
were made only by Francisco Wong and Antonia Matias, nick-named
Toning, — which was the way she signed the loose sheets, and there is no
clear proof that Doña Justina had authorized these two to act for her in
such liquidation; on the contrary if the result of that was a deficit as alleged
and sought to be there shown, of P9,210.49, that was not what Doña
Justina apparently understood for as the Court understands her statement
to the Honorable Judge of the Juvenile Court . . . the reason why she
preferred to stay in her home was because there she did not incur in any
debts . . . this being the case, . . . the Court will not adjudicate in favor of
Wong Heng on his counterclaim; on the other hand, while it is claimed that
the expenses were much less than the rentals and there in fact should be a
superavit, . . . this Court must concede that daily expenses are not easy to
compute, for this reason, the Court faced with the choice of the two
alternatives will choose the middle course which after all is permitted by the
rules of proof, Sec. 69, Rule 123 for in the ordinary course of things, a
person will live within his income so that the conclusion of the Court will be
that there is neither deficit nor superavit and will let the matter rest here.

Both parties on appeal reiterate their respective claims but we agree with
the lower court that both claims should be denied. Aside from the reasons
given by the court, we think that the claim of Justina Santos totalling
P37,235, as rentals due to her after deducting various expenses, should be
rejected as the evidence is none too clear about the amounts spent by
Wong for food29 masses30 and salaries of her maids.31 His claim for
P9,210.49 must likewise be rejected as his averment of liquidation is belied
by his own admission that even as late as 1960 he still had P22,000 in the
bank and P3,000 in his possession.

ACCORDINGLY, the contracts in question (Plff Exhs. 3-7) are annulled and
set aside; the land subject-matter of the contracts is ordered returned to the
estate of Justina Santos as represented by the Philippine Banking
Corporation; Wong Heng (as substituted by the defendant-appellant Lui
She) is ordered to pay the Philippine Banking Corporation the sum of
P56,564.35, with legal interest from the date of the filing of the amended
complaint; and the amounts consigned in court by Wong Heng shall be
applied to the payment of rental from November 15, 1959 until the
premises shall have been vacated by his heirs. Costs against the
defendant-appellant.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar,

Sanchez and Angeles, JJ., concur.

Separate Opinions

FERNANDO, J., concurring:

With the able and well-written opinion of Justice Castro, I am in full

agreement. The exposition of the facts leaves nothing to be desired and the
statement of the law is notable for its comprehensiveness and clarity. This
concurring opinion has been written solely to express what I consider to be
the unfortunate and deplorable consequences of applying the pari
delicto concept, as was, to my mind, indiscriminately done, to alien
landholding declared illegal under the Krivenko doctrine in some past
decisions.
It is to be remembered that in Krivenko v. The Register of Deeds of Manila,
1 this Court over strong dissents held that residential and commercial lots

may be considered agricultural within the meaning of the constitutional

provision prohibiting the transfer of any private agricultural land to
individuals, corporations or associations not qualified to acquire or hold
lands of the public domain in the Philippines save in cases of hereditary
succession.

That provision of the Constitution took effect on November 15, 1935 when
the Commonwealth Government was established. The interpretation as set
forth in the Krivenko decision was only handed down on November 15,
1947. Prior to that date there were many who were of the opinion that the
phrase agricultural land should be construed strictly and not be made to
cover residential and commercial lots. Acting on that belief, several
transactions were entered into transferring such lots to alien vendees by
Filipino-vendors.

After the Krivenko decision, some Filipino vendors sought recovery of the
lots in question on the ground that the sales were null and void. No definite
ruling was made by this Court until September of 1953, when on the 29th of
said month, Rellosa v. Gaw Chee Hun,2 Bautista v. Uy Isabelo,3 Talento v.
Makiki,4 Caoile v. Chiao Peng5 were decided.

Of the four decisions in September, 1953, the most extensive discussion of

the question is found in Rellosa v. Gaw Chee Hun, the opinion being
penned by retired Justice Bautista Angelo with the concurrence only of one
Justice, Justice Labrador, also retired. Former Chief Justice Paras as well
as the former Justices Tuason and Montemayor concurred in the result.
The necessary sixth vote for a decision was given by the then Justice
Bengzon, who had a two-paragraph concurring opinion disagreeing with
the main opinion as to the force to be accorded to the two cases,6 therein
cited. There were two dissenting opinions by former Justices Pablo and
Alex Reyes. The doctrine as announced in the Rellosa case is that while
the sale by a Filipino-vendor to an alien-vendee of a residential or a
commercial lot is null and void as held in the Krivenko case, still the
Filipino-vendor has no right to recover under a civil law doctrine, the parties
being in pari delicto. The only remedy to prevent this continuing violation of
the Constitution which the decision impliedly sanctions by allowing the alien
vendees to retain the lots in question is either escheat or reversion. Thus:
"By following either of these remedies, or by approving an implementary
law as above suggested, we can enforce the fundamental policy of our
Constitution regarding our natural resources without doing violence to the
principle of pari delicto."7

Were the parties really in pari delicto? Had the sale by and between
Filipino-vendor and alien-vendee occurred after the decision in
the Krivenko case, then the above view would be correct that both Filipino-
vendor and alien-vendee could not be considered as innocent parties within
the contemplation of the law. Both of them should be held equally guilty of
evasion of the Constitution.

Si n ce , h o w e ve r, th e sa l e s i n q u e sti o n to o k p l a ce p ri o r to
the Krivenko decision, at a time when the assumption could be honestly
entertained that there was no constitutional prohibition against the sale of
commercial or residential lots by Filipino-vendor to alien-vendee, in the
absence of a definite decision by the Supreme Court, it would not be doing
violence to reason to free them from the imputation of evading the
Constitution. For evidently evasion implies at the very least knowledge of
what is being evaded. The new Civil Code expressly provides: "Mistakes
upon a doubtful or difficult question of law may be the basis of good faith."8

According to the Rellosa opinion, both parties are equally guilty of evasion
of the Constitution, based on the broader principle that "both parties are
presumed to know the law." This statement that the sales entered into prior
to the Krivenko decision were at that time already vitiated by a guilty
knowledge of the parties may be too extreme a view. It appears to ignore a
postulate of a constitutional system, wherein the words of the Constitution
acquire meaning through Supreme Court adjudication. 1awphîl.nèt

Reference may be made by way of analogy to a decision adjudging a

statute void. Under the orthodox theory of constitutional law, the act having
been found unconstitutional was not a law, conferred no rights, imposed no
duty, afforded no protection.9 As pointed out by former Chief Justice
Hughes though in Chicot County Drainage District v. Baxter State Bank:
10 "It is quite clear, however, that such broad statements as to the effect of a

determination of unconstitutionality must be taken with qualifications. The

actual existence of a statute, prior to such a determination, is an operative
fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of
subsequent ruling as to invalidity may have to be considered in various
aspects, — with respect to particular relations, individual and corporate,
and particular conduct, private and official. Questions of rights claimed to
have become vested, of status, of prior determinations deemed to have
finality and acted upon accordingly, of public policy in the light of the nature
both of the statute and of its previous application, demand examination."

After the Krivenko decision, there is no doubt that continued possession by

alien-vendee of property acquired before its promulgation is violative of the
Constitution. It is as if an act granting aliens the right to acquire residential
and commercial lots were annulled by the Supreme Court as contrary to
the provision of the Constitution prohibiting aliens from acquiring private
agricultural land.

The question then as now, therefore, was and is how to divest the alien of
such property rights on terms equitable to both parties. That question
should be justly resolved in accordance with the mandates of the
Constitution not by a wholesale condemnation of both parties for entering
into a contract at a time when there was no ban as yet arising from
the Krivenko decision, which could not have been anticipated.
Unfortunately, under the Rellosa case, it was assumed that the parties,
being in pari delicto, would be left in the situation in which they were,
neither being in a position to seek judicial redress.

Would it not have been more in consonance with the Constitution, if instead
the decision compelled the restitution of the property by the alien-vendee to
the Filipino-vendor? Krivenko decision held in clear, explicit and
unambigous language that: "We are deciding the instant case under
section 5 of Article XIII of the Constitution which is more comprehensive
and more absolute in the sense that it prohibits the transfer to aliens of any
private agricultural land including residential land whatever its origin might
have been . . . . This prohibition [Rep. Act No. 133] makes no distinction
between private lands that are strictly agricultural and private lands that are
residential or commercial. The prohibition embraces the sale of private
lands of any kind in favor of aliens, which is again a clear implementation
and a legislative interpretation of the constitutional prohibition. . . . It is well
to note at this juncture that in the present case we have no choice. We are
construing the Constitution as it is and not as we may desire it to be.
Perhaps the effect of our construction is to preclude aliens, admitted freely
into the Philippines, from owning sites where they may build their homes.
But if this is the solemn mandate of the Constitution, we will not attempt to
compromise it even in the name of amity or equity."11
Alien-vendee is therefore incapacitated or disqualified to acquire and hold
real estate. That incapacity and that disqualification should date from the
adoption of the Constitution on November 15, 1935. That incapacity and
that disqualification, however, was made known to Filipino-vendor and to
alien-vendee only upon the promulgation of the Krivenko decision on
November 15, 1947. Alien-vendee, therefore, cannot be allowed to
continue owning and exercising acts of ownership over said property, when
it is clearly included within the Constitutional prohibition. Alien-vendee
should thus be made to restore the property with its fruits and rents to
Filipino-vendor, its previous owner, if it could be shown that in the utmost
good faith, he transferred his title over the same to alien-vendee, upon
restitution of the purchase price of course.

The Constitution bars alien-vendees from owning the property in question.

By dismissing those suits, the lots remained in alien hands.
Notwithstanding the solution of escheat or reversion offered, they are still at
the moment of writing, for the most part in alien hands. There have been
after almost twenty years no proceedings for escheat or reversion.

Yet it is clear that an alien-vendee cannot consistently with the

constitutional provision, as interpreted in the Krivenko decision, continue
owning and exercising acts of ownership over the real estate in question. It
ought to follow then, if such a continuing violation of the fundamental law is
to be put an end to, that the Filipino-vendor, who in good faith entered into,
a contract with an incapacitated person, transferring ownership of a piece
of land after the Constitution went into full force and effect, should, in the
light of the ruling in the Krivenko case, be restored to the possession and
ownership thereof, where he has filed the appropriate case or proceeding.
Any other construction would defeat the ends and purposes not only of this
particular provision in question but the rest of the Constitution itself.

The Constitution frowns upon the title remaining in the alien-vendees.

Restoration of the property upon payment of price received by Filipino
vendor or its reasonable equivalent as fixed by the court is the answer. To
give the constitutional provision full force and effect, in consonance with the
dictates of equity and justice, the restoration to Filipino-vendor upon the
payment of a price fixed by the court is the better remedy. He thought he
could transfer the property to an alien and did so. After the Krivenko case
had made clear that he had no right to sell nor an alien-vendee to purchase
the property in question, the obvious solution would be for him to reacquire
the same. That way the Constitution would be given, as it ought to be
given, respect and deference.

It may be said that it is too late at this stage to hope for such a solution, the
Rellosa opinion, although originally concurred in by only one justice, being
too firmly imbedded. The writer however sees a welcome sign in the
adoption by the Court in this case of the concurring opinion of the then
Justice, later Chief Justice, Bengzon. Had it been followed then, the
problem would not be still with us now. Fortunately, it is never too late —
not even in constitutional adjudication.

—————————————————————————————————

Case 21. Lim vs People 133 SCRA 333

FIRST DIVISION

G.R. No. L-34338 November 21, 1984

LOURDES VALERIO LIM, petitioner, 


vs.

PEOPLE OF THE PHILIPPINES, respondent.

RELOVA, J.:

Petitioner Lourdes Valerio Lim was found guilty of the crime of estafa and
was sentenced "to suffer an imprisonment of four (4) months and one (1)
day as minimum to two (2) years and four (4) months as maximum, to
indemnify the offended party in the amount of P559.50, with subsidize
imprisonment in case of insolvency, and to pay the costs." (p. 14, Rollo)

From this judgment, appeal was taken to the then Court of Appeals which
affirmed the decision of the lower court but modified the penalty imposed
by sentencing her "to suffer an indeterminate penalty of one (1) month and
one (1) day of arresto mayor as minimum to one (1) year and one (1) day
of prision correccional as maximum, to indemnify the complainant in the
amount of P550.50 without subsidiary imprisonment, and to pay the costs
of suit." (p. 24, Rollo)
The question involved in this case is whether the receipt, Exhibit "A", is a
contract of agency to sell or a contract of sale of the subject tobacco
between petitioner and the complainant, Maria de Guzman Vda. de Ayroso,
thereby precluding criminal liability of petitioner for the crime charged.

The findings of facts of the appellate court are as follows:

... The appellant is a businesswoman. On January 10, 1966, the appellant

went to the house of Maria Ayroso and proposed to sell Ayroso's tobacco.
Ayroso agreed to the proposition of the appellant to sell her tobacco
consisting of 615 kilos at P1.30 a kilo. The appellant was to receive the
overprice for which she could sell the tobacco. This agreement was made
in the presence of plaintiff's sister, Salud G. Bantug. Salvador Bantug drew
the document, Exh. A, dated January 10, 1966, which reads:

To Whom It May Concern:

This is to certify that I have received from Mrs. Maria de Guzman Vda. de
Ayroso. of Gapan, Nueva Ecija, six hundred fifteen kilos of leaf tobacco to
be sold at Pl.30 per kilo. The proceed in the amount of Seven Hundred
Ninety Nine Pesos and 50/100 (P 799.50) will be given to her as soon as it
was sold.

This was signed by the appellant and witnessed by the complainant's

sister, Salud Bantug, and the latter's maid, Genoveva Ruiz. The appellant
at that time was bringing a jeep, and the tobacco was loaded in the jeep
and brought by the appellant. Of the total value of P799.50, the appellant
had paid to Ayroso only P240.00, and this was paid on three different
times. Demands for the payment of the balance of the value of the tobacco
were made upon the appellant by Ayroso, and particularly by her sister,
Salud Bantug. Salud Bantug further testified that she had gone to the
house of the appellant several times, but the appellant often eluded her;
and that the "camarin" the appellant was empty. Although the appellant
denied that demands for payment were made upon her, it is a fact that on
October 19, 1966, she wrote a letter to Salud Bantug which reads as
follows:

Dear Salud,

Hindi ako nakapunta dian noon a 17 nitong nakaraan, dahil kokonte pa ang
nasisingil kong pera, magintay ka hanggang dito sa linggo ito at tiak na ako
ay magdadala sa iyo. Gosto ko Salud ay makapagbigay man lang ako ng
marami para hindi masiadong kahiyahiya sa iyo. Ngayon kung gosto mo ay
kahit konte muna ay bibigyan kita. Pupunta lang kami ni Mina sa Maynila
ngayon. Salud kung talagang kailangan mo ay bukas ay dadalhan kita ng
pera.

Medio mahirap ang maningil sa palengke ng Cabanatuan dahil nagsisilipat

ang mga suki ko ng puesto. Huwag kang mabahala at tiyak na babayaran
kita.

Patnubayan tayo ng mahal na panginoon Dios. (Exh. B).

Ludy

Pursuant to this letter, the appellant sent a money order for P100.00 on
October 24, 1967, Exh. 4, and another for P50.00 on March 8, 1967; and
she paid P90.00 on April 18, 1967 as evidenced by the receipt Exh. 2,
dated April 18, 1967, or a total of P240.00. As no further amount was paid,
the complainant filed a complaint against the appellant for estafa. (pp. 14,
15, 16, Rollo)

In this petition for review by certiorari, Lourdes Valerio Lim poses the
following questions of law, to wit:

1. Whether or not the Honorable Court of Appeals was legally right in

holding that the foregoing document (Exhibit "A") "fixed a period" and "the
obligation was therefore, immediately demandable as soon as the tobacco
was sold" (Decision, p. 6) as against the theory of the petitioner that the
obligation does not fix a period, but from its nature and the circumstances it
can be inferred that a period was intended in which case the only action
that can be maintained is a petition to ask the court to fix the duration
thereof;

2. Whether or not the Honorable Court of Appeals was legally right in

holding that "Art. 1197 of the New Civil Code does not apply" as against the
alternative theory of the petitioner that the fore. going receipt (Exhibit "A")
gives rise to an obligation wherein the duration of the period depends upon
the will of the debtor in which case the only action that can be maintained is
a petition to ask the court to fix the duration of the period; and
3. Whether or not the honorable Court of Appeals was legally right in
holding that the foregoing receipt is a contract of agency to sell as against
the theory of the petitioner that it is a contract of sale. (pp. 3-4, Rollo)

It is clear in the agreement, Exhibit "A", that the proceeds of the sale of the
tobacco should be turned over to the complainant as soon as the same
was sold, or, that the obligation was immediately demandable as soon as
the tobacco was disposed of. Hence, Article 1197 of the New Civil Code,
which provides that the courts may fix the duration of the obligation if it
does not fix a period, does not apply.

Anent the argument that petitioner was not an agent because Exhibit "A"
does not say that she would be paid the commission if the goods were
sold, the Court of Appeals correctly resolved the matter as follows:

... Aside from the fact that Maria Ayroso testified that the appellant asked
her to be her agent in selling Ayroso's tobacco, the appellant herself
admitted that there was an agreement that upon the sale of the tobacco
she would be given something. The appellant is a businesswoman, and it is
unbelievable that she would go to the extent of going to Ayroso's house and
take the tobacco with a jeep which she had brought if she did not intend to
make a profit out of the transaction. Certainly, if she was doing a favor to
Maria Ayroso and it was Ayroso who had requested her to sell her tobacco,
it would not have been the appellant who would have gone to the house of
Ayroso, but it would have been Ayroso who would have gone to the house
of the appellant and deliver the tobacco to the appellant. (p. 19, Rollo)

The fact that appellant received the tobacco to be sold at P1.30 per kilo
and the proceeds to be given to complainant as soon as it was sold,
strongly negates transfer of ownership of the goods to the petitioner. The
agreement (Exhibit "A') constituted her as an agent with the obligation to
return the tobacco if the same was not sold.

ACCORDINGLY, the petition for review on certiorari is dismissed for lack of

merit. With costs.

SO ORDERED.

Teehankee (Chairman), Melencio-Herrera, Plana, Gutierrez, Jr. and De la

Fuente, JJ., concur
—————————————————————————————————

Case 22. Araneta Inc vs Phil. Sugar Estates 20 SCRA 330

EN BANC

G.R. No. L-22558 May 31, 1967

GREGORIO ARANETA, INC., petitioner, 


vs.

THE PHILIPPINE SUGAR ESTATES DEVELOPMENT CO.,
LTD., respondent.

Araneta and Araneta for petitioner.


Rosauro Alvarez and Ernani Cruz Paño for respondent.

REYES, J.B.L., J.:

Petition for certiorari to review a judgment of the Court of Appeals, in its

CA-G.R. No. 28249-R, affirming with modification, an amendatory decision
of the Court of First Instance of Manila, in its Civil Case No. 36303, entitled
"Philippine Sugar Estates Development Co., Ltd., plaintiff, versus J. M.
Tuason & Co., Inc. and Gregorio Araneta, Inc., defendants."

As found by the Court of Appeals, the facts of this case are:

J. M. Tuason & Co., Inc. is the owner of a big tract land situated in Quezon
City, otherwise known as the Sta. Mesa Heights Subdivision, and covered
by a Torrens title in its name. On July 28, 1950, through Gregorio Araneta,
Inc., it (Tuason & Co.) sold a portion thereof with an area of 43,034.4
square meters, more or less, for the sum of P430,514.00, to Philippine
Sugar Estates Development Co., Ltd. The parties stipulated, among in the
contract of purchase and sale with mortgage, that the buyer will —

Build on the said parcel land the Sto. Domingo Church and Convent

while the seller for its part will —

Construct streets on the NE and NW and SW sides of the land herein sold
so that the latter will be a block surrounded by streets on all four sides; and
the street on the NE side shall be named "Sto. Domingo Avenue;"

The buyer, Philippine Sugar Estates Development Co., Ltd., finished the
construction of Sto. Domingo Church and Convent, but the seller, Gregorio
Araneta, Inc., which began constructing the streets, is unable to finish the
construction of the street in the Northeast side named (Sto. Domingo
Avenue) because a certain third-party, by the name of Manuel Abundo, who
has been physically occupying a middle part thereof, refused to vacate the
same; hence, on May 7, 1958, Philippine Sugar Estates Development Co.,
Lt. filed its complaint against J. M. Tuason & Co., Inc., and instance,
seeking to compel the latter to comply with their obligation, as stipulated in
the above-mentioned deed of sale, and/or to pay damages in the event
they failed or refused to perform said obligation.

Both defendants J. M. Tuason and Co. and Gregorio Araneta, Inc.

answered the complaint, the latter particularly setting up the principal
defense that the action was premature since its obligation to construct the
streets in question was without a definite period which needs to he fixed
first by the court in a proper suit for that purpose before a complaint for
specific performance will prosper.

The issues having been joined, the lower court proceeded with the trial,
and upon its termination, it dismissed plaintiff's complaint (in a decision
dated May 31, 1960), upholding the defenses interposed by defendant
Gregorio Araneta, Inc. 1äwphï1.ñët

Plaintiff moved to reconsider and modify the above decision, praying that
the court fix a period within which defendants will comply with their
obligation to construct the streets in question.

Defendant Gregorio Araneta, Inc. opposed said motion, maintaining that

plaintiff's complaint did not expressly or impliedly allege and pray for the
fixing of a period to comply with its obligation and that the evidence
presented at the trial was insufficient to warrant the fixing of such a period.

On July 16, 1960, the lower court, after finding that "the proven facts
precisely warrants the fixing of such a period," issued an order granting
plaintiff's motion for reconsideration and amending the dispositive portion of
the decision of May 31, 1960, to read as follows:
WHEREFORE, judgment is hereby rendered giving defendant Gregorio
Araneta, Inc., a period of two (2) years from notice hereof, within which to
comply with its obligation under the contract, Annex "A".

Defendant Gregorio Araneta, Inc. presented a motion to reconsider the

above quoted order, which motion, plaintiff opposed.

On August 16, 1960, the lower court denied defendant Gregorio Araneta,
Inc's. motion; and the latter perfected its appeal Court of Appeals.

In said appellate court, defendant-appellant Gregorio Araneta, Inc.

contended mainly that the relief granted, i.e., fixing of a period, under the
amendatory decision of July 16, 1960, was not justified by the pleadings
and not supported by the facts submitted at the trial of the case in the court
below and that the relief granted in effect allowed a change of theory after
the submission of the case for decision.

Ruling on the above contention, the appellate court declared that the fixing
of a period was within the pleadings and that there was no true change of
theory after the submission of the case for decision since defendant-
appellant Gregorio Araneta, Inc. itself squarely placed said issue by
alleging in paragraph 7 of the affirmative defenses contained in its answer
which reads —

7. Under the Deed of Sale with Mortgage of July 28, 1950, herein
defendant has a reasonable time within which to comply with its obligations
to construct and complete the streets on the NE, NW and SW sides of the
lot in question; that under the circumstances, said reasonable time has not
elapsed;

Disposing of the other issues raised by appellant which were ruled as not
meritorious and which are not decisive in the resolution of the legal issues
posed in the instant appeal before us, said appellate court rendered its
decision dated December 27, 1963, the dispositive part of which reads —

IN VIEW WHEREOF, judgment affirmed and modified; as a consequence,

defendant is given two (2) years from the date of finality of this decision to
comply with the obligation to construct streets on the NE, NW and SW
sides of the land sold to plaintiff so that the same would be a block
surrounded by streets on all four sides.
Unsuccessful in having the above decision reconsidered, defendant-
appellant Gregorio Araneta, Inc. resorted to a petition for review
by certiorari to this Court. We gave it due course.

We agree with the petitioner that the decision of the Court of Appeals,
affirming that of the Court of First Instance is legally untenable. The fixing of
a period by the courts under Article 1197 of the Civil Code of the Philippines
is sought to be justified on the basis that petitioner (defendant below)
placed the absence of a period in issue by pleading in its answer that the
contract with respondent Philippine Sugar Estates Development Co., Ltd.
gave petitioner Gregorio Araneta, Inc. "reasonable time within which to
comply with its obligation to construct and complete the streets." Neither of
the courts below seems to have noticed that, on the hypothesis stated,
what the answer put in issue was not whether the court should fix the time
of performance, but whether or not the parties agreed that the petitioner
should have reasonable time to perform its part of the bargain. If the
contract so provided, then there was a period fixed, a "reasonable time;"
and all that the court should have done was to determine if that reasonable
time had already elapsed when suit was filed if it had passed, then the
court should declare that petitioner had breached the contract, as averred
in the complaint, and fix the resulting damages. On the other hand, if the
reasonable time had not yet elapsed, the court perforce was bound to
dismiss the action for being premature. But in no case can it be logically
held that under the plea above quoted, the intervention of the court to fix
the period for performance was warranted, for Article 1197 is precisely
predicated on the absence of any period fixed by the parties.

Even on the assumption that the court should have found that no
reasonable time or no period at all had been fixed (and the trial court's
amended decision nowhere declared any such fact) still, the complaint not
having sought that the Court should set a period, the court could not
proceed to do so unless the complaint in as first amended; for the original
decision is clear that the complaint proceeded on the theory that the period
for performance had already elapsed, that the contract had been breached
and defendant was already answerable in damages.

Granting, however, that it lay within the Court's power to fix the period of
performance, still the amended decision is defective in that no basis is
stated to support the conclusion that the period should be set at two years
after finality of the judgment. The list paragraph of Article 1197 is clear that
the period can not be set arbitrarily. The law expressly prescribes that —

the Court shall determine such period as may under the circumstances
been probably contemplated by the parties.

All that the trial court's amended decision (Rec. on Appeal, p. 124) says in
this respect is that "the proven facts precisely warrant the fixing of such a
period," a statement manifestly insufficient to explain how the two period
given to petitioner herein was arrived at.

It must be recalled that Article 1197 of the Civil Code involves a two-step
process. The Court must first determine that "the obligation does not fix a
period" (or that the period is made to depend upon the will of the debtor),"
but from the nature and the circumstances it can be inferred that a period
was intended" (Art. 1197, pars. 1 and 2). This preliminary point settled, the
Court must then proceed to the second step, and decide what period was
"probably contemplated by the parties" (Do., par. 3). So that, ultimately, the
Court can not fix a period merely because in its opinion it is or should be
reasonable, but must set the time that the parties are shown to have
intended. As the record stands, the trial Court appears to have pulled the
two-year period set in its decision out of thin air, since no circumstances
are mentioned to support it. Plainly, this is not warranted by the Civil Code.

In this connection, it is to be borne in mind that the contract shows that the
parties were fully aware that the land described therein was occupied by
squatters, because the fact is expressly mentioned therein (Rec. on
Appeal, Petitioner's Appendix B, pp. 12-13). As the parties must have
known that they could not take the law into their own hands, but must resort
to legal processes in evicting the squatters, they must have realized that
the duration of the suits to be brought would not be under their control nor
could the same be determined in advance. The conclusion is thus forced
that the parties must have intended to defer the performance of the
obligations under the contract until the squatters were duly evicted, as
contended by the petitioner Gregorio Araneta, Inc.

The Court of Appeals objected to this conclusion that it would render the
date of performance indefinite. Yet, the circumstances admit no other
reasonable view; and this very indefiniteness is what explains why the
agreement did not specify any exact periods or dates of performance.
It follows that there is no justification in law for the setting the date of
performance at any other time than that of the eviction of the squatters
occupying the land in question; and in not so holding, both the trial Court
and the Court of Appeals committed reversible error. It is not denied that
the case against one of the squatters, Abundo, was still pending in the
Court of Appeals when its decision in this case was rendered.

In view of the foregoing, the decision appealed from is reversed, and the
time for the performance of the obligations of petitioner Gregorio Araneta,
Inc. is hereby fixed at the date that all the squatters on affected areas are
finally evicted therefrom.

Costs against respondent Philippine Sugar Estates Development, Co., Ltd.

So ordered.

Concepcion, C.J., Dizon, Regala, Makalintal, Bengzon, J.P., Sanchez and

Castro, JJ., concur.

—————————————————————————————————

Case 23. Millare vs Hernando 151 SCRA 484

FIRST DIVISION

June 30, 1987

G.R. No. L-55480

PACIFICA MILLARE, petitioner, 


vs.

HON. HAROLD M. HERNANDO, In his capacity as Presiding Judge,
Court of Instance of Abra, Second Judicial District, Branch I,
ANTONIO CO and ELSA CO, respondents.

FELICIANO, J.:

On 17 June 1975, a five-year Contract of Lease 1 was executed between

petitioner Pacifica Millare as lessor and private respondent Elsa Co,
married to Antonio Co, as lessee. Under the written agreement, which was
scheduled to expire on 31 May 1980, the lessor-petitioner agreed to rent
out to thelessee at a monthly rate of P350.00 the "People's Restaurant", a
commercial establishment located at the corner of McKinley and Pratt
Streets in Bangued, Abra.

The present dispute arose from events which transpired during the months
of May and July in 1980. According to the Co spouses, sometime during
the last week of May 1980, the lessor informed them that they could
continue leasing the People's Restaurant so long as they were amenable to
paying creased rentals of P1,200.00 a month. In response, a counteroffer
of P700.00 a month was made by the Co spouses. At this point, the lessor
allegedly stated that the amount of monthly rentals could be resolved at a
later time since "the matter is simple among us", which alleged remark was
supposedly taken by the spouses Co to mean that the Contract of Lease
had been renewed, prompting them to continue occupying the subject
premises and to forego their search for a substitute place to rent. 2 In
contrast, the lessor flatly denied ever having considered, much less offered,
a renewal of the Contract of Lease.

The variance in versions notwithstanding, the record shows that on 22 July

1980, Mrs. Millare wrote the Co spouses requesting them to vacate the
leased premises as she had no intention of renewing the Contract of Lease
which had, in the meantime, already expirecl. 3 In reply, the Co spouses
reiterated their unwillingness to pay the Pl,200.00 monthly rentals
supposedly sought bv Mrs. Millare which they considered "highly
excessive, oppressive and contrary to existing laws". They also signified
their intention to deposit the amount of rentals in court, in view of Mrs.
Millare's refusal to accept their counter-offer.4 Another letter of demand from
Mrs. Millare was received on 28 July 1980 by the Co spouses, who
responded by depositing the rentals for June and July (at 700.00 a month)
in court.

On 30 August 1980, a Saturday, the Co spouses jumped the gun, as it

were, and filed a Complaint 5 (docketed as Civil Case No. 1434) with the
then Court of First Instance of Abra against Mrs. Millare and seeking
judgment (a) ordering the renewal of the Contract of Lease at a rental rate
of P700.00 a nionth and for a period of ten years, (b) ordering the
defendant to collect the sum of P1,400.00 deposited by plaintiffs with the
court, and (c) ordering the defendant to pay damages in the amount of
P50,000.00. The following Monday, on 1 September 1980, Mrs. Millare filed
an ejectment case against the Co spouses in the Municipal Court of
Bangued, Abra, docketed as Civil Case No. 661. The spouses Co,
defendants therein, sut)sequently set up lis pendens as a Civil Case No.
661. The spouses Co, defendants therein, subsequently set up lis
pendens as a defense against the complaint for ejectment.

Mrs. Millare, defendant in Civil Case No. 1434, countered with an Omnibus
Motion to Dismiss6 rounded on (a) lack of cause of action due to plaintiffs'
failure to establish a valid renewal of the Contract of Lease, and (b) lack of
jurisdiction by the trial court over the complaint for failure of plaintiffs to
secure a certification from the Lupong Tagapayapa of the barangay
wherein both disputants reside attesting that no amicable settlement
between them had been reached despite efforts to arrive at one, as
required by Section 6 of Presidential Decree No. 1508. The Co spouses
opposed the motion to dismiss. 7

In an Order dated 15 October 1980, respondent judge denied the motion to

dismiss and ordered the renewal of the Contract of Lease. Furthermore
plaintiffs were allowed to deposit all accruing monthly rentals in court, while
defendant Millare was directed to submit her answer to the complaint. 8 A
motion for reconsideration 9 was subsequently filed which, however, was
likewise denied. 10 Hence, on 13 November 1980, Mrs. Millare filed the
instant Petition for Certiorari, Prohibition and Mandamus, seeking injunctive
relief from the abovementioned orders. This Court issued a temporary
restraining order on 21 November 1980 enjoining respondent, judge from
conducting further proceedings in Civil Case No. 1434. 11 Apparently, before
the temporary restraining order could be served on the respondent judge,
he rendered a "Judgment by Default" dated 26 November 1980 ordering
the renewal of the lease contract for a term of 5 years counted from the
expiration date of the original lease contract, and fixing monthly rentals
thereunder at P700.00 a month, payable in arrears. On18 March 1981, this
Court gave due course to the Petition for Certiorari, Prohibition and
Mandamus. 12

Two issues are presented for resolution: (1) whether or not the trial court
acquired jurisdiction over Civil Case No. 1434; and (2) whether or not
private respondents have a valid cause of action against petitioner.

Turning to the first issue, petitioner's attack on the jurisdiction of the trial
court must fail, though for reasons different from those cited by the
respondent judge. 13 We would note firstly that the conciliation procedure
required under P.D. 1508 is not a jurisdictional requirement in the sense
that failure to have prior recourse to such procedure would not deprive a
court of its jurisdiction either over the subject matter or over the person of
the defendant.14 Secondly, the acord shows that two complaints were
submitted to the barangay authorities for conciliation — one by petitioner
for ejectment and the other by private respondents for renewal of the
Contract of Lease. It appears further that both complaints were, in fact,
heard by the Lupong Tagapayapa in the afternoon of 30 August 1980. After
attempts at conciliation had proven fruitless, Certifications to File Action
authorizing the parties to pursue their respective claims in court were then
issued at 5:20 p.m. of that same aftemoon, as attested to by the Barangay
Captain in a Certification presented in evidence by petitioner herself. 15

Petitioner would, nonetheless, assail the proceedings in the trial court on a

technicaety, i.e., private respondents allegedly filed their complaint at 4:00
p.m. of 30 August 1980, or one hour and twenty minutes before the
issuance of the requisite certification by the Lupng Tagapayapa. The defect
in procedure admittedly initially present at that particular moment when
private respondents first filed the complaint in the trial court, was cured by
the subsequent issuance of the Certifications to File Action by the
barangay Lupong Tagapayapa Such certifications in any event constituted
substantial comphance with the requirement of P.D. 1508.

We turn to the second issue, that is, whether or not the complaint in Civil
Case No. 1434 filed by the respondent Co spouses claiming renewal of the
contract of lease stated a valid cause of action. Paragraph 13 of the
Contract of Lease reads as follows:

13. This contract of lease is subject to the laws and regulations ofthe
goverrunent; and that this contract of lease may be renewed after a period
of five (5) years under the terms and conditions as will be mutually agreed
upon by the parties at the time of renewal; ... (Emphasis supplied.)

The respondent judge, in his Answer and Comment to the Petition, urges
that under paragraph 13 quoted above.

there was already a consummated and finished mutual agreement of the

parties to renew the contract of lease after five years; what is only left
unsettled between the parties to the contract of lease is the amount of the
monthly rental; the lessor insists Pl,200 a month, while the lessee is
begging P700 a month which doubled the P350 monthly rental under the
original contract .... In short, the lease contract has never expired because
paragraph 13 thereof had expressly mandated that it is renewable. ...16

In the "Judgment by Default" he rendered, the respondent Judge

elaborated his views — obviously highly emotional in character — in the
following extraordinary tatements:

However, it is now the negative posture of the defendant-lessor to block,

reject and refuse to renew said lease contract. It is the defendant-lessor's
assertion and position that she can at the mere click of her fingers, just
throw-out the plaintiffs-lessees from the leased premises and any time after
the original term of the lease contract had already expired; This negative
position of the defendantlessor, to the mind of this Court does not conform
to the principles and correct application of the philosophy underlying the
law of lease; for indeed, the law of lease is impressed with public interest,
social justice and equity; reason for which, this Court cannot sanction lot
owner's business and commercial speculations by allowing them
with "unbridled discretion" to raise rentals even to the extent of
"extraordinary gargantuan proportions, and calculated to unreasonably and
unjustly eject the helpless lessee because he cannot afford said inflated
monthly rental and thereby said lessee is placed without any alternative,
except to surrender and vacate the premises mediately,-" Many business
establishments would be closed and the public would directly suffer the
direct consequences; Nonetheless, this is not the correct concept or
perspective the law of lease, that is, to place the lessee always at the
mercy of the lessor's "Merchant of Venice" and to agit the latter's personal
whims and caprices; the defendant-lessor's hostile attitude by imposing
upon the lessee herein an "unreasonable and extraordinary gargantuan
monthly rental of P1,200.00", to the mind of this Court, is "fly-by night
unjust enrichment" at the expense of said lessees; but, no Man should
unjustly enrich himself at the expense of another; under these facts and
circumstances surrounding this case, the action therefore to renew the
lease contract! is "tenable" because it falls squarely within the coverage
and command of Articles 1197 and 1670 of the New Civil Code, to wit:

xxx xxx xxx

The term "to be renewed" as expressly stipulated by the herein parties in

the original contract of lease means that the lease may be renewed for
another term of five (5) years; its equivalent to a promise made by the
lessor to the lessee, and as a unilateral stipulation, obliges the lessor to
fulfill her promise; of course the lessor is free to comply and honor her
commitment or back-out from her promise to renew the lease contract; but,
once expressly stipulated, the lessor shall not be allowed to evade or
violate the obligation to renew the lease because, certainly, the lessor may
be held hable for damages caused to the lessee as a consequence of the
unjustifiable termination of the lease or renewal of the same; In other
words, the lessor is guilty of breach of contract: Since the original lease
was fixed for five (5) years, it follows, therefore, that the lease contract is
renewable for another five (5) years and the lessee is not required before
hand to give express notice of this fact to the lessor because it was
expressly stipulated in the original lease contract to be renewed;
Wherefore, the bare refusal of the lessor to renew the lease contract unless
the monthly rental is P1,200.00 is contrary to law, morals, good customs,
public policy, justice and equity because no one should unjustly enrich
herself at the expense of another. Article 1197 and 1670 of the New Civil
Code must therefore govern the case at bar and whereby this Court is
authorized to fix the period thereof by ordering the renewal of the lease
contract to another fixed term of five (5) years.17

Clearly, the respondent judge's grasp of both the law and the Enghsh
language is tenuous at best. We are otherwise unable to comprehend how
he arrived at the reading set forth above. Paragraph 13 of the Contract of
Lease can only mean that the lessor and lessee may agree to renew the
contract upon their reaching agreement on the terms and conditions to be
embodied in such renewal contract. Failure to reach agreement on the
terms and conditions of the renewal contract will of course prevent the
contract from being renewed at all. In the instant case, the lessor and the
lessee conspicuously failed to reach agreement both on the amount of the
rental to be payable during the renewal term, and on the term of the
renewed contract.

The respondent judge cited Articles 1197 and 1670 of the Civil Code to
sustain the "Judgment by Default" by which he ordered the renewal of the
lease for another term of five years and fixed monthly rentals thereunder at
P700.00 a month. Article 1197 of the Civil Code provides as follows:

If the obligation does not fix a period, but from its nature and the
circumstances it can be inferred that a period was intended, the courts may
fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon
the will of the debtor.

In every case, the courts shall determine such period as may, under the
circumstances, have been probably contemplated by the parties. Once
fixed by the courts, the period cannot be changed by them. (Emphasis
supplied.)

The first paragraph of Article 1197 is clearly inapplicable, since the Contract
of Lease did in fact fix an original period of five years, which had expired. It
is also clear from paragraph 13 of the Contract of Lease that the parties
reserved to themselves the faculty of agreeing upon the period of the
renewal contract. The second paragraph of Article 1197 is equally clearly
inapplicable since the duration of the renewal period was not left to the wiu
of the lessee alone, but rather to the will of both the lessor and the lessee.
Most importantly, Article 1197 applies only where a contract of lease clearly
exists. Here, the contract was not renewed at all, there was in fact no
contract at all the period of which could have been fixed.

Article 1670 of the Civil Code reads thus:

If at the end of the contract the lessee should continue enjoying the thing
left for 15 days with the acquiescence of the lessor and unless a notice to
the contrary by either party has previously been given. It is understood that
there is an implied new lease, not for the period of the original contract but
for the time established in Articles 1682 and 1687. The ther terms of the
original contract shall be revived. (Emphasis suplied.)

The respondents themselves, public and private, do not pretend that the
continued occupancy of the leased premises after 31 May 1980, the date of
expiration of the contract, was with the acquiescence of the lessor. Even if
it be assumed that tacite reconduccion had occurred, the implied new lease
could not possibly have a period of five years, but rather would have been
a month-to-month lease since the rentals (under the original contract) were
payable on a monthly basis. At the latest, an implied new lease (had one
arisen) would have expired as of the end of July 1980 in view of the written
demands served by the petitioner upon the private respondents to vacate
the previously leased premises.

It follows that the respondent judge's decision requiring renewal of the

lease has no basis in law or in fact. Save in the limited and exceptional
situations envisaged inArticles ll97 and 1670 of the Civil Code, which do
not obtain here, courts have no authority to prescribe the terms and
conditions of a contract for the parties. As pointed out by Mr. Justice J.B.L.
Reyes in Republic vs. Philippine Long Distance Telephone,Co.,[[18

[P]arties cannot be coerced to enter into a contract where no agreement is

had between them as to the principal terms and conditions of the contract.
Freedom to stipulate such terms and conditions is of the essence of our
contractual system, and by express provision of the statute, a contract may
be annulled if tainted by violence, intimidation or undue influence (Article
1306, 1336, 1337, Civil Code of the Philippines).

Contractual terms and conditions created by a court for two parties are a
contradiction in terms. If they are imposed by a judge who draws upon his
own private notions of what morals, good customs, justice, equity and
public policy" demand, the resulting "agreement" cannot, by definition, be
consensual or contractual in nature. It would also follow that such coerced
terms and conditions cannot be the law as between the parties themselves.
Contracts spring from the volition of the parties. That volition cannot be
supplied by a judge and a judge who pretends to do so, acts tyrannically,
arbitrarily and in excess of his jurisdiction. 19

WHEREFORE, the Petition for Certiorari, Prohibition and mandamus is

granted. The Orders of the respondent judge in Civil Case No. 1434 dated
26 September 1980 (denying petitioner's motion to dismiss) and 4
November 1980 (denying petitioner's motion for reconsideration), and the
"Judgment by Default" rendered by the respondent judge dated 26
November 1980, are hereby annulled and set aside and Civil Case No.
1434 is hereby dismissed. The temporary restraining order dated 21
November 1980 issued by this ourt, is hereby made permanent. No
pronouncement as to costs.

SO ORDERED.

Yap (Chairman), Narvasa, Melencio-Herrera, Cruz, Gancayco and

Sarmiento, JJ., concur.